How Health Insurance Plans Can Help You Save Tax Under Section 80D

Health insurance policies have two uses. One is to protect your health, and the second is to protect your wealth. It can not only save money by helping you with your medical bills, but it can also save your income from taxes. Whether you have bought an individual health insurance plan or parents health insurance, the premium you pay towards health insurance can fetch you solid tax benefits through Section 80D of the Income Tax Act. Here’s how health insurance plans can help you save on taxes. 

What is Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act allows taxpayers to claim a tax deduction on health insurance premiums paid towards a health insurance plan. This tax benefit can be claimed towards the premiums paid for self, spouse, dependent children, and parents. Under this section, benefits can also be claimed for preventive health checkups, medical expenses for uninsured parents, and contributions made towards Central Government Health Schemes (CGHS). 

Who is eligible for tax breaks under Section 80D? 

Individual taxpayers and Hindu Undivided Families are eligible for tax deductions on health insurance premiums under this section.

What are the tax deductions allowed under Section 80D linked to health insurance plans?

Health insurance for self, spouse and children

Individuals can claim a tax deduction of up to INR 25,000 for health insurance premiums paid for themselves, their spouse, and their children. This is for those who are below 60 years of age. If you and your spouse are senior citizens, then you are eligible for a deduction of up to INR 50,000 under section 80D. Individuals, however, cannot claim tax benefits for premiums paid towards the health insurance plans of their siblings, grandparents, working children, and other relatives.

Health insurance for parents

Health insurance premiums paid for parents can bring in additional tax benefits on top of the ones paid for yourself. A tax deduction of up to INR 25,000 is allowed for health insurance premiums paid for parents’ health insurance under Section 80D. If they are senior citizens, tax benefits increase to INR 50,000. If you and your parents are senior citizens, then your tax deduction can go up to INR 100000. 

Examples of how these deductions can be calculated

Scenario 1

If you are 39 years old and have parents who are 70 years old:

Tax exemption for self (39), spouse and children = INR 25000

Tax exemption for parents (70) = INR 50000

Total exemption = INR 75000

Scenario 2

If you are 22 years old and your parents are 55 years old:

Tax exemption for self (22) = INR 25000

Tax exemption for parents (55) = INR 25000

Total exemption = INR 50000

Scenario 3

If you are 62 years old and your parents are 85 years old: 

Tax exemption for self and spouse (62) = INR 50000

Tax exemption for parents (85) = INR 50000

Total exemption = INR 100000

What are the health insurance plans that are eligible for tax deduction under Section 80D?

There are many types of health insurance plans available in the market. Most of them, including individual health insurance plans, family floater plans, senior citizen health insurance plans, and critical illness health insurance plans, are eligible for this tax break. Even top-up plans can be covered under Section 80D for tax benefits. If you are paying a premium for a group health insurance plan provided by your employer, that amount will also be eligible for a tax break. But if the premium comes from the employer’s pocket, it will not be considered a tax benefit for you. If you have paid a premium for a multiple-year health insurance plan in a single shot as a lump sum, you are still eligible for a tax deduction. This will be applied proportionately every year and will be subject to the limitations placed on self, spouse, children, and parents. 

Mode of payment

The mode of payment is very important when it comes to Section 80D. Health insurance premiums will be eligible for consideration only if non-cash payments such as net banking, UPI, debit, and credit cards are used. If you have used cash to pay your health insurance premium, you will not be eligible for this specific tax break.

How to claim tax benefits under Section 80D 

At the time of submitting your income tax proof to your employer, you can submit your health insurance premium payment receipt as proof. Additionally, you can also claim the tax deduction directly by submitting proof when filing your income tax returns.

Conclusion

More money in the pocket is always welcome, especially given the times we live in. A health insurance plan is designed to save both your health and wealth. So ensure that you claim these benefits without fail, year on year, to save your hard-earned income.