Tax Benefits on Health Insurance Under Section 80 D

The Indian Income Tax Act of 1961 provides individuals with many avenues to save tax. One of the many provisions through which you can reduce your tax liability is through section 80D. Section 80D of the Income Tax Act contains provisions that allow you to claim tax benefits on health insurance. If you already have health insurance or are planning to get one in the future, here’s how you can claim the premiums you pay towards the policy as a deduction from your total income.

Tax Benefits of Health Insurance?

Section 80D of the Income Tax Act of 1961 lets you reduce your overall tax liability by enabling you to claim the premiums you pay towards a health insurance plan as a deduction from your total taxable income.

The benefit under section 80D is available only to individuals and Hindu Undivided Families (HUFs). Even non-resident individuals can purchase health insurance for tax benefits as long as the policy is approved by the Insurance Regulatory and Development Authority of India (IRDAI).

One of the many advantages of section 80D of the Income Tax Act, 1961 is that it enables you to claim the premiums you pay towards a health insurance policy for yourself, your spouse and children and your dependent parents. The maximum amount of tax deduction you can claim in a financial year will be based on whom the health insurance policy is for. Here’s an overview of the limits imposed by section 80D.

Health Insurance Policy	Age of the Policyholders	Maximum Limit
For self	Below 60 years	₹25,000
For self, spouse and dependent children	Below 60 years	₹25,000
For self, spouse and dependent children	Self – above 60 years Spouse – below 60 years	₹50,000
For self, spouse and dependent children	Self – above 60 years Spouse – above 60 years	₹50,000
For self, spouse, dependent children and parents	Self – below 60 years Parents – below 60 years	₹50,000 (₹25,000 + ₹25,000)
For self, spouse, dependent children and parents	Self – below 60 years Parents – above 60 years	₹75,000 (₹25,000 + ₹50,000)
For self, spouse, dependent children and parents	Self – above 60 years Parents – above 60 years	₹1,00,000 (₹50,000 + ₹50,000)

Note: In addition to the health insurance premiums, you can also deduct expenses you incur for preventive health checkups to the tune of ₹5,000 per financial year, as long as the expenses are within the maximum limits specified above.

Tax Benefits on Health Insurance – An Example

Assume you’re a 42-year-old individual with a spouse, two dependent children and senior citizen parents. Now, you decide to purchase health insurance policies for yourself and your family.

The health insurance premium for the policy covering yourself, your spouse and your dependent children is ₹28,000 per annum. Meanwhile, the premium for the health insurance policy covering your senior citizen parents is ₹40,000.

According to section 80D of the Income Tax Act, 1961, the maximum amount that you can claim as a deduction is limited to ₹25,000 for the policy covering yourself, your spouse and your dependent children. For the policy covering your senior citizen parents, however, the maximum limit is ₹50,000.

Since your health insurance premium is more than the specified limit, the maximum you can claim will be capped at ₹25,000. However, the health insurance premium for your senior-citizen parents is lower than the specified limit, meaning that the entire amount you paid can be claimed as a deduction.

This means that you can claim ₹65,000 (₹25,000 + ₹40,000) as a deduction from your total taxable income.

Also Read More About How to Choose Health Insurance?

What Are the Documents You Need To Claim Tax Benefits on Health Insurance?

Although you don’t need to submit any documents when claiming tax benefits on health insurance, it is a good practice to store them safely at least for a few years. The Income Tax Department may request you to provide documentary proof supporting your claim under section 80D at the time of processing your income tax return. Here’s a list of the documents you need to have handy at all times.

The original policy document where your name or the names of your family members are listed as policyholders.
The health insurance premium payment receipts for the financial year in which you’re claiming them as a deduction from your total income.
The receipts and other documentary evidence in support of the preliminary health checkups that you or your family members underwent.

Things You Need To Know When Claiming Tax Benefits on Health Insurance

There are quite a few things you need to keep in mind before you claim tax benefits on health insurance. Let’s take a look at some of the most important points.

The health insurance premium payment must be made through non-cash modes like a cheque, demand draft or an electronic payment mode. Premiums paid in cash cannot be claimed as a deduction.
The premium payment must be made for the financial year in which you’re claiming tax benefits on health insurance. For instance, if you’re claiming a deduction under section 80D for the financial year 2022-2023, the health insurance premium payment must also be for the financial year 2022-2023.
Only the health insurance premium amount, excluding tax on health insurance and other charges, can be claimed as a deduction under section 80D.
In the case of premium payments for a multi-year health insurance policy, the maximum amount that you can claim in a financial year will be limited to the total premium amount divided by the policy tenure subject to the overall limits specified under section 80D.
The premiums paid towards health insurance riders can also be claimed as a deduction.
Health insurance premiums paid on behalf of your siblings, grandparents, independent children, or other relatives cannot be claimed.

Conclusion

Thanks to the Income Tax Act of 1961, you can opt for a tax-saving health insurance plan to reduce your tax liability. In addition to helping you unlock significant tax benefits, health insurance also lowers the impact that unexpected medical costs can have on your finances. That said, if you’re planning to purchase health insurance for tax benefits, remember to keep your policy and premium payment documents safe at least until your returns are processed by the Income Tax Department.