Health insurance offers a multitude of benefits to the policyholder. In times of medical emergencies, you can be rest assured that the financial concerns are taken care of so that you can focus on recovery. One aspect of health insurance that makes it even more lucrative is the tax benefits one can enjoy with it.
Section 80D of the Income Tax Act of 1961 deals largely with health insurance deductions, medical expenses, and the like. This makes health insurance not only a necessary expense but also an important investment to add to your financial portfolio and your tax-saving strategy. Let’s take a detailed look at these tax deductions.
Tax deductions for individuals under 60 years of age
If you are paying premiums for a health insurance policy that covers yourself, your spouse, and your dependent children, then you can claim deductions of up to ₹25,000 under Section 80D. This deduction is applicable only if the individuals covered under the plan are under 60 years of age.
Premiums for health insurance for parents under 60 years of age can be claimed as an additional deduction for up to ₹25,000. *
Tax deductions for individuals over 60 years of age
If you are paying health insurance premiums for your dependent parents aged over 60, then the deduction that you are eligible for increases to ₹50,000. This is separate from the ₹25,000 deduction that you can claim against the premium for yourself, your spouse, and your dependent children under 60 years of age.
If the policyholder as well as their parents are over 60 years of age, then the maximum deduction one can claim reaches ₹1 lakh under Section 80D of the Income Tax Act.
An example would illustrate this better:
Shefali pays ₹15,000 for a health insurance policy that covers herself, her spouse, and her teenage son. She used to pay ₹25,000 for a separate policy for her parents. The maximum deduction Shefali would get against her health insurance premiums was previously set at 40,000.
However, she has increased the parents’ health insurance premium to ₹30,000 for better coverage since they turned 60 two years ago. Now, she can claim deductions of up to ₹45,000. *
Tax benefits for long-term health insurance policies
If you are paying a lump sum premium for a long-term health policy, then the tax deduction for one year can be arrived at by dividing the premiums as per the duration of the policy. These benefits, too, would be subject to the upper limits. *
Things to remember about health insurance tax deductions:
- If the policyholder’s parents or children are working/financially independent, then the premiums paid towards their coverage are not applicable for deductions. *
- Remember to pay the premiums in any mode other than cash. Cash payments are not eligible for deductions. *
- Use a health insurance premium calculator as well as an income tax calculator to create a tax-saving strategy that provides you adequate savings while not compromising on the coverage for your loved ones. *
*Tax benefits are subject to changes in tax laws.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
