How are Tax Saving and Health Insurance Related?
Are you doing tax planning for this financial year? Great! Then you must already know that the premium paid towards health insurance either for yourself or your family offers tax benefits under section 80D of the Income Tax Act. As per the law, any premium that you pay towards health insurance policies for your kids, family, or parents, gets counted as a deduction. This deduction can be availed regardless of the fact whether your parents or your children are dependent on you or not.
Also, there’s a limit on the amount of tax benefits you can avail. The maximum deduction limit of the tax benefit depends on the age of the person who is insured. Suppose, the insured is under 60 years of age, the maximum tax deduction he/she can avail is of Rs. 25,000 per year. On the other hand, if the insurance is above the age of 60, then the deduction offered is Rs. 50,000.
If you have a health insurance policy for yourself and your parents who are above the age of 60 years, then you can avail a maximum tax benefit of Rs. 1, 00,000.
Apart from the tax benefits on the premium, you also avail benefits on premium paid on health check-ups. If you pay a premium of Rs. 20,000 and a health check-up of Rs. 5,000, then you’ll be eligible for a tax deduction of up to Rs. 25,000. Several hospitals offer health check-up packages with a health insurance policy.
A health insurance policy not only offers financial aid in case of emergencies, but also provides various other financial benefits.
Understanding section 80D for health insurance
Section 80D of the Income Tax Act provides tax deductions towards premium payment of health insurance policies for self and family of up to Rs.50, 000. Resident individuals, their spouse, children, and parents and Hindu Undivided Families (HUF) can avail this tax benefit.
Types of Deductions
- Health insurance premium paid for self and family
- Medical expenses of super senior citizens
- Health insurance premium paid for parents
- Preventive health check-up expenses
Please note: The premium payments should be made by any mode, except for cash. Cheques and DDs can also be used to make the payment of the premium. On the other hand, the payment made for preventive health check-ups can be made in cash.
How To Save On Tax With Health Insurance Premium Under Section 80D
A health insurance is a complete bliss! It not only helps you in saving tax for yourself but also helps get tax benefits when you insure the health of your spouse, dependent children, and parents. And the best part about saving tax under section 80D is that the deductions are over & above the deductions claimed under section 80C/CCC/CCD.
Let’s understand this with an example-
Rahul is 50 years old and his father is 69 years old. Rahul has taken a health insurance policy for himself and his father for which he pays insurance of Rs.28, 000 and Rs.37, 000 respectively. What can be the maximum amount he can claim under Section 80D?
As Rahul is not a senior citizen himself, he can claim up to Rs 25,000, for the premium paid on his policy. For his father’s health insurance policy, Rahul can claim up to Rs.50, 000 as he is a senior citizen. In the given case, the tax benefits he can avail are Rs 25,000 and Rs 35,000. Therefore, the total tax deduction will come to Rs.60, 000.
What happens in case of HUF?
An HUF can also claim a deduction under section 80D for a health insurance policy taken for any of the members of the HUF. This deduction will be Rs.25, 000 if the insured member is below 60 years, and the deduction will be Rs.30, 000 (increased to Rs.50, 000 in Budget 2018) if the insured member is 60 years old or above.
Health Insurance Tax Exception under section 80D
Here’s a chart showing the health insurance tax exception under section 80D-
||Deduction under 80D
|Individual and parents below 60 years
|Individual and family below 60 years but parents above 60 years
|Both individual, family and parents above 60 years
|Members of HUF
Understand Tax Saving Under Section 80DDB
Tax deduction under Section 80DDB is covered in Chapter VIA of the Income Tax Act, 1961. Taxpayers can avail tax benefits under this section for medical treatment of specified diseases for individuals and HUF.
Diseases specified under section 80DDB
Listed below are eligible diseases or ailments that are specified under Section 80DDB for claiming tax deductions-
1. Neurological diseases, with disability level of 40% and more -
- Dystonia Musculorum Deformans
2. Chronic Renal failure
3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)
4. Malignant Cancers
5. Hematological disorders
New deduction limit u/s 80DDB for AY 2019-20
The tax deduction limit was revised by the Government of India in Union Budget 2019 for AY 2019-20. Following are the new deduction limits:
|Age of person who underwent treatment
||Deduction allowed to assessee
|Up to 60 years
||Least of actual amount spent or Rs 40,000
|Senior citizen (60-80 years)
||Least of actual amount spent or Rs 1,00,000
|Super senior citizen (above 80 years)
||Least of actual amount spent or Rs 1,00,000
Understand Tax Saving Under Section 80U
There are a few sections under the income tax laws that provide tax benefits to individuals in case they or any of their family members are suffering from specific disabilities. Section 80U provides tax benefits if an individual suffers a disability. Let’s understand the tax benefits available under Section 80U.
People Who Can Avail Deduction Under Section 80U
The tax benefit under Section 80U can be availed by a resident individual who has been certified as a disabled person by a medical authority. For this section, a person with a disability is defined as a person with at least 40 percent disability, certified by valid medical authorities.
For the claim deduction Under Section 80U, disability has been defined as one of the following:
- Mental illness
- Low vision
- Hearing impairment
- Loco motor disability
- Mental retardation
The section also has a provision for a person with a severe disability. Severe disability is defined as a condition where the disability is 80 percent or more. Multiple disabilities, autism, and cerebral palsy are also included in severe impairment.
Amount of deduction under 80U
Under Section 80U, people with disabilities get a deduction of Rs. 75,000, and people with severe disabilities get a deduction Rs. 1,25,000.
Pre-requisites to avail claim deductions under section 80U
There isn’t any defined set of documents required to avail of the tax benefits under Section 80U. The person just needs to have a certificate manifesting the disability from a recognized medical authority in Form 10-IA. You don’t need to offer bills for the cost incurred for the pursuance of treatment or such other expenses.
Is personal accident insurance a taxable benefit?
Personal accident insurance offers coverage for death or disability due to accidents. Getting into accidents have become common due to increased negligence and road rash in India. India is a hotspot for road accidents in the world as more than a thousand accidents happen each day. Considering the increasing stats on accidental deaths in India, having a personal accident insurance policy is the best way possible to be prepared for any unfortunate event.
Tax deduction benefit is applicable to personal accident insurance only under a specific condition. One can claim the cost of a premium on the insurance against loss of income. The guidelines to claim insurance premium as a tax benefit are very intricate. One can enjoy the advantage of tax deduction on the policy if they successfully demonstrate that the insurance premium is paid to protect their taxable income. Thus, personal accident insurance can be tax deductible for the small businessmen or traders who pay the premium to secure their earning capacity.
The tax deduction conditions become more difficult to understand in the case of combined policies. Some insurance companies offer a combination of life insurance with personal accident cover. In such cases, the policyholders need to figure out the portion of premium applicable for tax benefit.
Features and Benefits of Health Insurance
Medical exigencies can prove to be really difficult to an average middle-class person. If you consider the ever-increasing medical inflation, you will realise that the treatment cost of even primary diseases have become expensive. Thankfully, with a higher level of technology and science, these days most of the diseases are curable. However, we mostly get attentive when we find ourselves trapped in such unexpected circumstances.
You need to have a health Insurance policy to cover yourself and your family from the wrath of sudden, huge financial expenses. Having health insurance is no more an option, it’s a need.
Listed below are few features and benefits that you can avail under a health insurance policy-
Optimum health coverage-
Due to a sedentary lifestyle, unhealthy diet, environmental pollution and adulterated food, there has been an increment in the number of lifestyle diseases across age groups. The group medical insurance policy offered by your company is not enough.The sky-rocketing medical expenses have made health insurance a must-have. A health insurance policy offers coverage against pre & post hospitalisation expenses, in-patient treatment, day care treatments, donor expenses, domiciliary hospitalisation, etc.
One of the best ways to avail tax deductions under Section 80D of the Income Tax Act, 1961 is getting a health insurance policy. You can avail a maximum tax exemption of up to 1 lakhs, currently. Please refer the table above.
You spend thousands of rupees in one visit to the hospital. If you take health insurance causally and not cover yourself and your family, you might as well have to spend your savings to get the right medical treatment. You never get the right health insurance when you really need it, that’s why it is necessary to plan and get one when you don’t need it.
What is Required to Buy Health Insurance Online?
Getting a health insurance policy is no more a cumbersome task. Previously, when buying an insurance policy required a lot of documentation, most people avoided the entire charade and settled without getting one. With the advancement in technology, everything is possible at the comfort of your palms. Just start by researching the perfect policy for yourself and your family, and you are good to go. There are several types of health insurance plans available in the market. All the policies are more or less the same but the features and value-adds are different. There are also several pre-requisite and information that you need to keep handy before buying a health insurance policy.
Once you have the basic information in place, it’s just a matter of following a few simple steps.
Compare the plans-
Compare the prices, benefits, and every feature the policy offers. Go for the policy that suits your needs and concerns. Also, look into the add-on coverage you can buy along with the policy for optimum protection.
Note the benefits-
Most health insurance policies off tax benefits. Also, you get additional discounts at the time of purchase. Apart from these benefits, look for other things you are entitled for under the policy like- sum-assured restoration, maternity cover, renewability, cashless facility, AYUSH cover, critical illness cover, etc.
Fill in the details-
Generally, the following documents are required to buy health insurance- age proof, identity proof, address proof, and a passport size photograph. Please note- some plans may require medical check-up reports, usually for people above the age of 45
You can make the premium payment via net banking or your debit card or credit card. When you buy a health insurance policy online, you save yourself a lot of time. With exciting discounts and competitive premium prices, save some money too.