Health Insurance Tax Benefits

• The benefits of taking a health insurance policy are plenty. Aside from protection against unforeseen medical expenses, health insurance is also eligible for generous tax deductions. Due to rapidly inflating medical costs, the government has introduced several tax exemptions and deductions under the section 80D of the income tax act. Medical insurance tax benefit is an important step taken by the Indian government, in order to make quality medical treatment accessible to the general public. The most significant health insurance tax benefit is that the premium paid is exempt from tax.

The Health insurance tax benefits under the section 80D are listed in the table below. The table indicates the maximum amount of tax deductions for Self, Spouse, Dependent Children and Parents. All the plans listed as 80D medical insurance are eligible for the following deductions.

To help you understand how the type of policy affects health insurance tax exemptions, given below are examples of two different 80D medical insurance holders:-
Example 1:- Rohan (35) is a member of a family of six. His family constitutes of his wife (34), two children aged (10 & 7), father (65) and mother (60). He pays a yearly premium of Rs 15,000 for himself, his wife and two children. Additionally, he spends another 28,000 on his parent’s health insurance plan. Moreover, he spent Rs 15,000 for his wife’s health checkup and another 10,000 for his family’s health checkup. His total health insurance tax exemption will be as follows:-

• Maximum tax deduction of Rs 20,000 (based on total expenses) can be availed from the premium (Rs 15,000) and the health checkup expenses (Rs 15,000) of Rs. 30,000 paid for himself and his wife & children.
• Maximum tax deduction of Rs 33,000 can be availed for the premium (Rs 28,000) and health checkup expenses (Rs 10,000) of Rs. 38,000 paid for his elderly parents.
• Hence a maximum of Rs 53,000 can be claimed as mediclaim tax benefit by Rohan.

As you can see, despite spending Rs. 68,000 as insurance premium, he could avail a mediclaim tax benefit of Rs 53,000.
Example 2:-
Renee is a senior citizen paying a premium of Rs 52,000 for herself, her husband and children. Apart from that she also pays a premium of Rs 55,000 for her parents who are senior citizens. Under the Section 80D of the income tax act, she is eligible for the following health insurance tax benefit:-

• Maximum tax deduction of Rs. 50,000 from the premium of 52,000 paid for herself, husband & children.
• Maximum tax deduction of Rs 50,000 for the premium of 55,000 paid for elderly parents.
• Hence a total of Rs 100,000 can be claimed as mediclaim tax benefit by Renee.

Apart from the 80D medical insurance benefits, there are several extensions of the tax act which is meant for individuals with specific needs such as:-

Group Health Insurance: Group policies are not eligible for tax benefits.

Premium Payments in Cash: Premium payments made in cash is not eligible for tax benefits under the section 80D.

Go through tax exemptions for policies carefully:

• If you happen to pay health insurance premium for your sibling, you will not be able to claim tax benefits. However, for exceptional cases like severe physical or mental disabilities, you can claim tax deductions.

• Similarly, if you are paying health insurance premium for your in-laws you will not be eligible for tax deductions.

Avoid payment of premium in cash:-

• If you pay your insurance premium in cash, you will not be eligible for medical insurance tax benefits. On the other hand, if you opt for a three year term policy, you can avail a discount of 10% on digital payments.

Ensure that dependent children are covered under health insurance:-

• Accidents and illness can strike at any moment. To ensure that your children receive quality medical treatment, make sure they are covered under a family floater health insurance policy. For a small amount of premium, you can be assured of financial assistance at the time of emergencies.

Review the network of hospitals:-

• Ensure that hospitals near you are listed under the hospital network of the insurance company. If it is not listed, you will not be able to avail the cashless facility.