Health Insurance Tax Benefits: Eligibility, Deductions & Exclusions

Medical emergencies usually catch people off guard. In India, the majority of the people do not have health insurance and must rely on their savings or loans in the event of a medical emergency. Having a decent health insurance not only assists you in dealing with the high costs of hospitalization but also provides you with a health insurance tax benefit under Section 80D of the Income Tax Act.

When you purchase a health insurance policy, you will be eligible for tax benefits. So, you may rest confident that the next time you file your income tax returns, you will be able to claim a premium deduction under Section 80D. It allows you to save money spent on taxes by purchasing medical insurance.

What Does Health Insurance Tax Benefit under Section 80D Entail?

Section 80D allows any person or HUF to deduct medical insurance premiums paid in any given year from their total income. The benefit of the deduction is accessible for a health insurance plan for oneself and for a policy to cover a spouse, dependent children, or a parent.

Eligibility for a Section 80D Deduction

Individuals and HUF tax-payers are the only ones who can deduct medical insurance premiums and medical expenditures. Individuals and HUF taxpayers can purchase insurance for themselves, their spouses, dependent children, and parents. This deduction is not available to any other entity. A company or a corporation, for example, cannot claim a medical expense deduction under Section 80D.

Deductions Under Section 80D

Section 80D allows an individual or a HUF to claim a medical expenses deduction under 80D for the following payments:

Scenario 1: You can get a policy covering you, your spouse, and any dependent children. In this scenario, you can deduct the amount you pay for the insurance coverage up to Rs 25,000 every financial year. If the covered individuals under the insurance are under the age of 60, it is applicable. You get a larger deduction of Rs 50,000 if you or your spouse are 60 years old or older.

Scenario 2: You have the option of purchasing a medical insurance plan that covers you and your dependant parents. If your parents are under 60, you are entitled to an extra Rs 25,000 health insurance tax benefit every financial year. Your total deduction for the year will be Rs 50,000 in this scenario.

Scenario 3: You can get a Mediclaim policy covering you, your family, and your elderly parents. If either of your parent is beyond 60, you can claim a deduction of Rs 50,000 every financial year. If you are under the age of 60, the maximum aggregate deduction you may claim is Rs 75,000. If you are also a senior citizen, your total Mediclaim deduction is limited to Rs 1,00,000 (Rs 50,000 + Rs 50,000).

What are the Exclusions in Section 80D?

While a policyholder is eligible to health insurance tax benefit under Section 80D for premiums paid, there are several circumstances in which the deduction cannot be claimed:

• Only the taxpayer, not a third party, is responsible for paying the premium.
• If your employer covers your group health insurance premium, you are not eligible for tax advantages.
• Tax deductions are not available for premiums paid on behalf of working children, siblings, or any other member of your extended family.
• The health insurance tax benefit under Section 80D does not apply to cash payments for premiums.

Conclusion

You can file a claim with your insurance provider, and the insurance company will honour it after performing a simple examination. You may file a claim by emailing them, visiting their website, or contacting their customer service representatives.

Note- Tax benefits are as per current provisions of Income Tax Act, 1961, and are subject to amendments from time to time.