Medical emergencies may cause havoc to your finances and your savings may see a huge dip. In case you do not have adequate savings, you may have to compromise on the quality of treatment. An excellent way to protect you and your family from the financial distress caused due to a medical emergency is to buy health insurance.
These plans provide financial security in case of a diagnosis of a covered medical ailment. Some common benefits include pre and post-hospitalization expenses, doctor, nurse, surgeon, and anesthetist fees, room rent, ambulance charges, and many more. Having a health insurance plan from a reputed insurer gives you peace of mind and allows you to deal with the emotional distress caused due to the illness.
Most people are aware of the common benefits of health insurance. However, a lesser-known benefit that you may not know about is tax savings on the medical insurance premium.
Tax savings under section 80D
Section 80D of the Income Tax Act, 1961 helps to reduce your total tax liability via health insurance premium. As per this section, the premium paid on these kinds of insurance plans is eligible for deductions from your total income. In addition to the premium paid for self-coverage, the insurance premium paid to avail coverage for spouse, children, and dependent parents is eligible for these benefits.
Applicability of the tax benefit
The Section 80D tax benefit is available to individuals as well as Hindu Undivided Family (HUFs).
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Eligibility for individuals
Premium paid to procure coverage for self, spouse, and dependent children may be claimed as deductions. Additionally, if you pay the premium to cover your dependent parents under a health insurance plan, the same is eligible for tax benefits. The table below shows the maximum tax deductions under section 80D:
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Premium paid for self, spouse, and children (INR)
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Premium paid for dependent parents (INR)
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Total tax benefits (INR)
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Age of proposer, family, and parents is less than 60 years
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25,000
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25,000
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50,000
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Proposer and family is below 60 years but parents are over 60 years
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25,000
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50,000
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75,000
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Age of proposer, family, and parents exceeds 60 years
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50,000
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50,000
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1,00,000
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Members of a Hindu Undivided Family
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25,000
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25,000
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50,000
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Non-resident individuals (NRIs)
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25,000
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25,000
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25,000
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*Senior citizens also includes super seniors over the age of 80 years
Example: Assume you are 50 years old with a 45-year spouse and two children aged 15 and 12 years. If you avail a health insurance policy for self, spouse, and children and the annual premium is INR 35,000, the maximum deduction available for the year is INR 25,000. If you purchase health coverage for your dependent parents who are senior citizens and the premium amount is INR 45,000, the entire amount is eligible for Section 80D benefits.
HUFs may claim tax benefits on health insurance premium paid for any member. The amount is capped at INR 25,000 if the member is below 60 years. For members aged above 60 years, the maximum deduction is INR 50,000 per annum.
Preventive health check-ups
If you incur any expense towards preventive health check-ups, an amount of up to INR 5,000 may be claimed as deduction under section 80D. However, the benefits are capped within the overall limits as mentioned above.
For example, if the annual premium on your health insurance is INR 21,000 and you spend INR 6,000 towards preventive health check-up, the maximum deduction allowed is INR 25,000 if you are below 60 years old.
Single premium health plans
If you pay a lump-sum amount in one year for a health plan that is valid for over one year, you are still eligible for the tax benefits. The eligible amount is calculated by dividing the premium amount paid by the total number of years of the policy. However, the maximum deduction is limited to the limitations as mentioned above.
If you think that insurance is not beneficial because you are healthy, think again. Health insurance not only offers financial protection in case of an ailment but also helps in reducing your tax liability during the year.
If you still are not covered, then get a policy today without further delay.