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.
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.
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.
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.
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.
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
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:
While Section 80D has a lot of benefits, there are certain exclusions under it as well.
Tax savings can be availed under the mediclaim deductions section 80C as well. Here are the major differences between section 80C and section 80D
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.
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.
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.
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.
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.
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.
Filing a tax return is not a daunting task. Following simple steps can ease the process: