If you’re considering a health insurance plan for your family, here’s a great news – it not only protects your family from medical emergencies, but also provides significant tax savings!
Have you heard about the tax benefits of health insurance in India? Under Section 80D, you can significantly reduce your taxes. Let’s explain in simple terms how it works, what benefits you can reap, and what things to keep in mind.
What is Health Insurance and Why is it Necessary?
Health insurance is a plan that covers your medical expenses—such as hospital bills, medication, or surgery costs. If you take out a policy for your family, you can cover you, your spouse, children, and even your parents under a single plan.
What are its tax benefits? Section 80D of the Income Tax Act provides you with a tax deduction on premium payments, which reduces your taxable income. This means you save money and your family is safe!
Tax Benefits of Section 80D: How Much Can You Save?
Let’s break it down:
For yourself and your family: If you pay health insurance premiums for yourself, your spouse, or children, you can claim a deduction of up to ₹25,000 per year. This amount will be deducted from your taxable income.
For parents: If you buy health insurance for your parents, you get an additional ₹25,000 deduction. And if your parents are senior citizens (over 60 years of age), this limit increases to ₹50,000.
Total Limit:
- If you and your family (non-senior citizens) are parents (non-senior), a maximum deduction of ₹50,000 (25,000 + 25,000) is possible.
- If your parents are senior citizens, a total of ₹75,000 (25,000 + 50,000) can be claimed.
- If you are a senior citizen and your parents are also senior citizens, a maximum deduction of ₹1,00,000 (50,000 + 50,000) is possible.
Preventive Health Check-ups: There’s a small bonus – you can also claim the expenses of preventive health check-ups (such as blood tests, full-body check-ups) up to ₹5,000, but this falls within the ₹25,000/₹50,000 limit.
Who Can Claim It?
Individuals and HUFs: This deduction is only available to individuals and Hindu Undivided Families (HUFs). Companies or firms cannot claim it.
Payment Mode: Premiums or check-ups paid through any mode other than cash (such as UPI, card, net banking) are eligible for deduction. Cash deductions are only allowed for check-ups, not premiums.
Eligible Members: You can claim for yourself, your spouse, dependent children, and your parents. Not for siblings or cousins.
Let’s Consider an Example
Suppose you are 35 years old and pay a premium of ₹20,000 for your family (you, your wife, and your children). Plus, you pay a premium of ₹40,000 for your senior citizen parents. You also get a preventive check-up done for ₹4,000. What’s the total?
For Family: ₹20,000 (deduction allowed)
For Parents: ₹40,000 (deduction allowed)
Check-up: ₹4,000 (deduction allowed, as this is within the ₹25,000/₹50,000 limit)
Total Deduction: ₹64,000
This means your taxable income will be reduced by ₹64,000, and if you are in the 30% tax slab, you will save ₹19,200 (64,000 × 30%) in tax!
Important Things to Keep in Mind
- No GST Deduction: The GST levied on the premium is not eligible for deduction. You can claim only the base premium.
- Employer-Sponsored Plans: If your employer provides health insurance and the premium is deducted from your salary, you can claim the deduction.
- Senior Citizen Rules: The deduction for senior citizens is up to ₹50,000, whether they have insurance or not (medical expenses can also be claimed if they don’t have a policy).
- Keep Proof: Keep premium receipts and check-up bills safe, as proof may be required when filing your ITR.
- Indian-Only Policies: This deduction is only applicable to insurance providers in India (such as Star Health, HDFC Ergo, or LIC). It will not be applicable to foreign policies.
| Features | Description |
|---|---|
| Section | 80D, Income Tax Act |
| Deduction Limit (Self + Family) | ₹25,000 (General) / ₹50,000 (Senior Citizen) |
| Deduction Limit (Parents) | ₹25,000 (General) / ₹50,000 (Senior Citizen) |
| Maximum Deduction | ₹1,00,000 (Senior Citizen Family + Parents) |
| Preventive Health Check-up | ₹5,000 (Within Limit) |
| Payment Mode | Anything except cash (Cash OK for preventive check-up) |
| Eligible People | Self, Spouse, Children, Parents |
Pros and Cons
Pros:
- Family cover for medical emergencies, tension-free.
- You can save up to ₹25,000 to ₹1,00,000 in tax.
- Preventive health check-ups are also eligible for deduction.
- Higher limit for senior citizens – up to ₹50,000.
- Deductions are also available on employer plans.
Cons:
- You will not receive a deduction if you pay the premium in cash. There is no deduction for GST and add-on riders.
- Valid only for Indian insurance policies.
- The ₹5,000 check-up limit is a bit low.
Conclusion
Family health insurance is a win-win deal – not only does it protect your family from medical expenses, but it also saves tax under Section 80D. It offers more value than a ₹16,499 phone!
If you’re looking for a solid plan, check out providers like Star Health, HDFC Ergo, or Bajaj Allianz. Consult your CA, calculate your premiums, and don’t forget to claim the deduction when filing your ITR.
Let us know in the comments what you think about the tax benefits of health insurance, and would you consider a plan for your family?
