Health Insurance is an essential investment that one should make. It provides the much-needed economic support in times of medical need or emergency. But still many people do not buy Health Insurance for a number of reasons. Apart from the lack of awareness, the burden of Health Insurance premiums is one of the main reasons why people hesitate to purchase medical insurance. However, many people are not aware of the fact that they can claim an income tax deduction on the Health Insurance premium they pay.
To encourage people to secure their lives with Health Insurance, the Govt. Of India through Section 80D of the Income Tax Act, 1961 facilitates people to avail tax deductions. As per this section, people can avail income tax deductions on paying their medical insurance premiums. Based on age, the maximum income tax deductions that people can claim will vary. This tax benefit is available for individuals as well as Hindu Undivided Families (HUF). This helps people in reducing the burden of Health Insurance premiums.
Any individuals or Hindu Undivided Families (HUFs), whose income come under the income tax slab are eligible to claim income tax deductions under Section 80D. It is interesting to note that one can also claim income tax deductions for paying Health Insurance premiums for their parents. Section 80D provides tax deductions under various scenarios.
Any individual who is aged below 60 years can claim an income tax deduction of up to Rs. 25,000/- for paying the medical insurance premium for self, spouse and dependent children. In addition, if a person pays Health Insurance Premium for parents who are below 60 years, he/she can claim an additional income tax deduction of Rs. 25,000/-. Thus, an individual below 60 years of age can claim a maximum income tax deduction of up to Rs. 50,000/- for paying Health Insurance premium for their family and parents aged below 60 years.
Similarly, if a person is above 60 years of age, then that person can claim an income tax deduction of up to Rs. 50,000 on paying Health Insurance premium for self, spouse and dependent children. Also, on paying the medical insurance premium for parents who are aged above 60 years, a person can claim an additional tax deduction of Rs. 50,000/-. Thus, a maximum of one lakh rupees can be claimed as an income tax deduction by a senior citizen on paying Health Insurance premium for their family and parents.
Apart from individuals, Section 80D deduction is also applicable to Hindu Undivided Families (HUFs). In the case of HUFs, the deduction is up to Rs. 25,000/- if the person is aged below 60 years and it is up to Rs. 50,000/- if the person is a senior citizen.
These deductions are applicable to people who are residing in India. However, NRIs can also claim an income tax deduction on Health Insurance premiums. The deduction limit is set as Rs. 25,000/- per year irrespective of the person’s age.
In addition to the medical insurance premium, people can also avail tax deductions on preventive health check-ups. The maximum tax deduction one can avail for preventive health check-ups under Section 80D is Rs. 5000/- per year which should not exceed the maximum deductions.
It is important to know that people can avail income tax deductions under Section 80D only for premiums paid to avail Health Insurance policies. One cannot avail tax deductions for Group Health Insurance as the premium will be taken care of by the employer. Also, only payments made via modes other than cash are eligible for a tax deduction. Moreover, people can avail income tax deductions only for paying the medical insurance premium for self, spouse, dependent children and parents.
Health Insurance provides the much-needed support in times of medical needs. In addition, investment in medical insurance also helps save tax. Thus Health Insurance acts as an essential investment both in terms of financial planning and securing the future.