Section 80D: Here's How You Can Save Tax On Health Insurance
Posted on Feb, 2020
Here's How You Can Save Tax on Health Insurance with Section 80DInvesting in a good health insurance policy, with high sums assured, enables you to concentrate on your treatment without worrying about its costs. It offers a sense of financial and emotional relief. When you invest in health insurance policies, you also become eligible for tax exemptions or reductions under various Sections of the Income Tax Act of 1961. Here's everything you should know about saving Tax on Health Insurance with Section 80D.
When is Section 80D applicable?To understand how to save tax with health insurance, we must first understand its applicability. As per the rules and regulations framed by the Government of India, every Indian citizen – be it an individual or a member of a Hindu Undivided Family (HUF) can avail tax deduction under 80D income tax laws. You can avail this deduction when you purchase medical insurance from your annual income in a given financial year. Apart from purchasing medical insurance for yourself, you can also avail deductions for buying the policy for your spouse and dependent children. Individuals bearing the financial costs of the parents (whether under the age of 60 or senior citizens) can avail additional deductions for purchasing medical polices for their parents as per 80D laws. The most significant advantage is that you can claim 80D medical insurance deductions over and above the deductions available under Sections 80C, 80CCC and 80CCD of the IT Act.
What are the deductions available under Section 80D?Health insurance tax exemptions available under section 80D as mentioned , apply based on individuals purchasing the policies and HUFs. Let's first understand the applicability with reference to individuals.
- As an individual purchasing health insurance, you may claim a maximum income tax deduction of ₹25,000 when you purchase an insurance policy for yourself, your spouse and your dependent children.
- In case you are also purchasing insurance policies for your parents under the age of 60 years, then you can avail an additional deduction of ₹25,000 and save tax with health insurance.
- In case you are under the age of 60 and are purchasing insurance policies for your senior citizen parents (aged 60 years and above), then you can avail further deductions of ₹50,000, making your total tax deduction ₹75,000 per annum.
- In case you are above 60 years of age and are paying the insurance premiums of your parents, then you become eligible to save an amount on ₹100,000 on health insurance premiums as per Mediclaim 80D rules.
HUFs investing in health insuranceAs per Section 80D income tax laws, HUFs may claim tax deductions for medical insurance claims filed for any or all members comprising the HUF. The deduction amount for members of HUFs, like individual insurance buyers, depends on their age. For instance, if the age of the HUF member is under 60 years, then such members will be eligible for annual tax deductions of ₹25,000. On the other hand, if the age of the HUF member exceeds 60 years, i.e. if they are senior citizens, then such members will be eligible for tax deductions of ₹50,000 per annum.
How to save taxes on preventive health check-upsAs we grow older, we feel the need to undergo a preventive health check-up, at least once a year. Insurance providers have made provisions for policyholder to undergo preventive health check-ups too, and the Government offers tax deductions on the check-ups as well. However, you need to be aware of the rules to save tax with health insurance when you undergo annual preventive health check-ups.
Here’s an example to help understand how preventive health check-ups work with reference to tax deductionsLet’s say you are paying an annual insurance premium of ₹20,000 for your general health insurance policy. You go for a preventive check-up which costs you ₹5,000. In such, a case, you can avail the total amount of ₹25,000 under Section 80D.
Tabular representation of tax deductions on preventive check-ups with examples
|Example||Premium paid for medical insurance||Expense incurred towards preventive health check up||Tax deduction under Section 80D|
|Example 1||₹15,000||₹10,000||₹15,000 + ₹5,000 = ₹20,000|
|Example 2||₹20,000||₹8,000||₹20,000 + ₹5,000 = ₹25,000|
|Example 3||₹24,000||₹3,000||₹24,000 + ₹1,000 = ₹25,000|
|Example 4||₹000||₹7,500||₹000+ ₹5,000 = ₹5,000|
As is evident from the above table, the deduction you claim does not raise your overall tax deduction limit above ₹25,000. Also, you may claim deduction under preventive health check-even if you don’t have health insurance.
Points to remember
- You can avail a maximum deduction of ₹5,000 on preventive health check-ups. The ₹5,000 limit is included within the overall limit of ₹25,000 towards the payment of health insurance premiums.
- Individuals and HUFs can claim tax deductions for money spent on preventive check-ups for self, spouse, dependent children and parents.
- While you cannot avail tax benefits if you pay your health insurance premiums in cash, as per Income Tax laws; you can still avail tax deductions for cash payments made towards preventive check-ups under Section 80D.