Section 80D Tax Benefits for Health Insurance

Individuals look out for methods to reduce their tax liability. You may claim tax deductions through various investments or expenses incurred during the financial year. One effective method to reduce your taxable income is through investments made in health insurance plans.

A health insurance policy offers dual benefits of coverage in case of medical emergencies as well as tax benefits. In case of medical contingencies, your insurance provider is liable to cover all medical-related expenses as per the terms and conditions of the policy. You may, therefore, enjoy financial security and have peace of mind knowing that you and your family are protected at all times.

In order to enjoy coverage under your health insurance plan, it is necessary to pay a certain premium on a regular basis. You may enjoy annual income tax benefits subject to the premium paid for you and your family. This includes coverage for self, spouse, and dependent children. The good news is that you may claim for income tax exemption on the premiums paid for your parents too. This helps you save a significant amount.

Tax Benefit on Health Insurance Plans

You may claim for health insurance tax benefits under the Income Tax Act, 1961. According to Section 80D of the Income Tax Act, you may avail of health insurance tax benefits up to INR 25,000 on premiums paid towards health insurance policies for self, spouse, and dependent children. You may claim an additional deduction of up to INR 25,000 on premiums paid for your parents (if they are less than 60 years of age).

According to the Budget 2018, you may claim an additional amount towards deduction if your parents are senior citizens. The Budget proposed a hike in the 80D medical insurance deduction for senior citizens. The earlier deduction amount was INR 30,000, which has now been raised to INR 50,000. Senior citizens may, therefore, benefit from this change, given the rising cost of medical facilities and consequently the need for greater coverage. This deduction may be claimed towards premium payment as well as costs associated with preventive health check-up.

This, therefore, indicates that you may enjoy higher tax deductions if you are paying a premium for your senior citizen parents. Before the budget announcement, you could avail of health insurance tax benefits up to a limit of INR 55,000, i.e. INR 25,000 for family and INR 30,000 for senior citizen parents. However, you may now enjoy a tax deduction of up to INR 75,000, i.e. INR 25,000 for family and INR 50,000 for senior citizen parents. This aids in reducing your tax liability largely.

In case you have attained 60 years and above, and are claiming health insurance tax benefits for your senior citizen parents too, you may claim a total deduction of INR 1 lakh under Section 80D. This includes tax benefits of up to INR 50,000 for family and INR 50,000 for senior citizen parents.

Tax Benefit Under Section 80DD and 80DDB

You may also avail of health insurance tax benefits under Section 80DD and Section 80DDB. Under Section 80DD, the tax-deductible amount extends up to INR 50,000 if you are bearing the financial responsibility towards the treatment of a handicapped dependent. This limit extends to INR 1 lakh for severe cases. Section 80DDB allows a tax deduction for the expenses incurred towards the treatment of certain diseases such as Parkinson’s disease, malignant cancer, chronic renal failure, and neurological disorders, among others. The upper ceiling on this deduction is INR 40,000 for those below 65 years of age and INR 60,000 for those above 65 years.

A health insurance policy provides the twin benefit of coverage and tax advantages. You may, therefore, shield yourself from unfortunate events and enjoy tax benefits of health insurance under a single plan.