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Mediclaim Deduction

Tax Deductions on Health Insurance


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Do you know with comprehensive health insurance, you can shoot two birds with one arrow? That's right! A premium paid towards health insurance policy not only gives financial support during a medical emergency but also entitled to tax exemption. Under section 80 D, of the Income Tax Act 1961, the premium paid on health insurance for self, dependent parents, spouse, and children comes under tax deductions. It reduces your taxable income and shows less tax liability. Therefore, it plays a vital role in your investment portfolio. Read here how you can avail benefits against tax deductions in health insurance.

Mediclaim Deductions Under Section 80D

Deductions pertaining to health insurance under section 80D are related to the tax exemptions that one can avail when they opt for an insurance policy. These tax deductions indirectly lower the premiums that an individual pays for their health insurance. Health insurance for parents or family can increase the tax exemptions, albeit to a certain maximum amount.

One can claim a deduction of up to Rs. 25,000 every budgetary year as a part of the deduction under Section 80D. There is a certain maximum deduction under section 80D that one can claim for the premium that is paid for health insurance. In a single financial year, a maximum amount of Rs. 50,000 can be claimed as deductions for the expenses incurred.

Mediclaim Deductions for Preventive Health Checkups

Any payments that have been made towards preventive health check-ups are entitled to a deduction of up to Rs. 5,000. This is well within the overall limit of Rs. 25,000/ 30,000. What exactly does this mean? What is the deduction that you can avail for a health check-up?

Consider the following scenario. You have paid Rs. 22,000 as a health insurance premium for yourself and another member of your family during the years 2018-2019. You have had a health check-up that cost Rs. 5,000. Under Section 80D of the Income Tax Act, Rs. 22,000 will be allowed for the insurance premium that has been paid, and only Rs. 3,000 of the health check-up amount will be allowed for the deduction. The overall deduction amounts to Rs. 25,000, which serves as the limit.

Mediclaim Deductions on Health Insurance Premium for Parents

In general, a maximum amount of Rs. 25,000 is qualified to be deducted for the medical insurance premium that is paid under section 80D. In case your parents are senior citizens, then the maximum limit for deductions is up to Rs. 30,000 every year.

How to claim the deduction under health insurance premium?

There are several health insurance tax benefits under Section 80D. Through the Finance Act, 2018, one can also claim higher deductions if the premiums paid are for senior citizens.

  • For individuals below the age of 60: In a case where everyone in the family is below 60, a deduction of Rs. 25,000 can be claimed. If there has been a premium paid for medical insurance for parents who are also below the age of 60, an additional Rs. 25,000 can be claimed as deductions. The total adds up to Rs. 50,000
  • When either parent is over the age of 60: If only one parent is above 60, then one can avail a tax benefit of up to Rs. 50,000. Apart from this, for the premium that is paid for the rest of the family, an additional Rs. 25,000 can be claimed as tax deductions. The total adds up to Rs. 75,000.
  • When the eldest member of the family is above the age of 60: In such a case, one can claim a tax deduction of Rs. 50,000. If the parents are above the age of 60, then an additional amount of Rs. 50,000 can be claimed in tax benefits. This makes the total add up to Rs. 1 lakh per annum.

Deduction on Health Insurance Premium for Senior Citizens

Senior citizens get a maximum deduction of Rs. 30,000 towards the health insurance premium. Deduction of Rs. 30,000 can be availed for super senior citizens (above the age of 80) who do not have any insurance policy. This amount can be claimed every financial year for treatments and medical check-ups, but not for their other expenses.

>> Check: Senior Citizens Health Insurance

Limits on Mediclaim Deductions under Section 80D

One can claim mediclaim deductions under section 80D subject to the premiums for health insurance which has been paid for your spouse and children. These benefits are not considered to be the same as the benefits available for preventive health check-ups.

The following are the mediclaim deduction limits for different persons covered:

  • Self and family: Exemption limit of Rs. 25,000 and a health check-up exemption of Rs.5000.
  • Self and family, along with parents: Exemption limit of Rs. 50,000 and a health check-up exemption of Rs.5000.
  • Self and family, along with senior citizen parents: Exemption limit of Rs. 55,000 and a health check-up exemption of Rs.5000.
  • Self (senior citizen) and family, along with senior citizen parents: Exemption limit of Rs. 60,000 and a health check-up exemption of Rs.5000.

Exclusions under Section 80D

While Section 80D has a lot of benefits, there are certain exclusions under it as well.

  • Third-party Payments: For an individual to get tax exemptions and deductions under this section, the health insurance premiums must be paid by the taxpayer. It cannot be paid by any third party.
  • Payments in Cash: If the premium amount is paid in cash, tax benefits cannot be availed by the taxpayer. Having said that, one can claim tax deductions of cash payments are made for preventive health care check-ups.
  • Service Tax: There are no tax benefits provided to taxpayers on the Service Tax and Cess charges that are imposed on the premiums. Service tax can be charged on the premiums that are paid for health insurance, and the amount to be paid is 14%.
  • Group Health Insurance: There are no tax benefits provided on Group Health Insurance policies under section 80D. If the taxpayers wish to pay an additional premium to improve the group cover, then they are eligible to claim tax deductions on the extra amount paid.

Difference Between Section 80D and Section 80C

Tax savings can be availed under the mediclaim deductions section 80C as well. Here are the major differences between section 80C and section 80D

  • According to section 80C, an individual is eligible to avail up to Rs 1.5 lakh of the total investment as a deduction from gross total income before calculating tax payable on it in a financial year. The tax deduction can be claimed only from income in the financial year in which the specified investment/expenditure is made.
  • However, provisions under section 80D provide deductions ranging from Rs. 25,000 to Rs.1,00,000 based on specified criteria.
  • A significant difference between the two sections is that section 80C allows for the inclusion of a wide spectrum of investments including mutual funds, life insurance premiums as well as small savings schemes. Section 80D, however, is applicable only for the premiums that are paid on health insurance.

Mediclaim Deduction under Section 80DD

Section 80DD of the Income Tax Act, 1961 is tailored to individuals with disabilities. Mediclaim deductions up to Rs. 75,000 (and Rs. 1,25,000 in the case of severe disabilities) can be availed by an individual for the rehabilitation, medical treatment, nursing, training of a dependent with a disability. The reliant can be a spouse, siblings, children, or a parent.

Mediclaim Deduction under section 80 DDB

If there are senior citizens or super senior citizens (above 80 years) for whom there are medical expenses, you can avail mediclaim deductions of up to Rs. 1,40,000. This amount is divided as Rs. 60,000 and Rs. 80,000 between senior citizens and super senior citizens respectively.

Rule 11DD specifies the list of critical ailments such as Parkinson's, cancer, chronic renal failure, etc. for which tax deductions are available under the purview of section 80D.

How to Claim Tax Deductions on Health Insurance Premium?

Mediclaim Deduction on Premium

Premium is the amount that you have to pay to the health insurance provider against the sum insured. According to section 80 D, of the Income Tax Act, the premium paid for the health insurance policy for self, or any family member or senior citizen is exempt from tax.

Mediclaim Deduction on Single Premium Health Policies

According to the 2018 budget, if you have made a lump-sum premium payment in a single year for a health policy that is valid for more than one year, you can claim a mediclaim deduction up to Rs.50000.

Mediclaim Reduction on Health Check-Ups

Preventive health check-ups help in early diagnosis and timely treatment. You can also avail mediclaim deductions up to Rs.5000 on preventive health check-ups per year. These check-ups include a blood sugar test, urine test, cholesterol test, ECG, etc.

Other Mediclaim Deductions

You can get the exemption from tax if you have paid the premium against health insurance for 80 years old senior citizens, treatment of specified illnesses, and treatment of a dependent with a disability. It reduces your taxable income low that reflects less tax liability.

How to File Tax Return?

Filing a tax return is not a daunting task. Following simple steps can ease the process:

  • For tax return, it's necessary to make the payment of the premium through net banking, cards, online, or another payment gateway.
  • Any payment in cash is not accepted for a tax deduction.
  • Premium paid for siblings, grandparents, paternal, and maternal relatives cannot be claimed under the tax deduction act.
  • Premium paid by parents on behalf of working children cannot be considered for tax benefit. Group health insurance premium paid by the company on behalf of the employees covered under the group is not eligible for deduction.
  • The government also encourages people to opt for medical insurance to get tax deductions.
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