What is No Claim Bonus in Health Insurance - Features & Benefits

Healthcare costs are on the rise, making it crucial to buy health insurance for you and your family. Whether you are young or old, you need medical insurance to protect you against rising health care costs. The government encourages everyone to invest in health insurance and allows you to claim tax benefits on health insurance premiums. Read on to learn more about how to claim tax deductions on a medical insurance policy.

Section 80D of the Income Tax Act, 1961 allows individuals and Hindu Undivided Family (HUF) to avail health insurance tax benefit on the premium paid. If your annual income comes under tax liability, you can buy a health insurance plan and claim tax deductions for the premium you pay. Whether you are buying an individual plan or a family floater plan, you can take advantage of the tax benefits. It helps you save your hard-earned income apart from protecting yourself against rising health care costs.

You need to claim tax benefits on medical insurance when you file your Income Tax Returns (ITR) for the said financial year. Follow the steps below to get the health insurance tax benefits.

Please note: You can claim tax benefits only if you have paid the premium through net banking, debit or credit card, cheque, or demand draft. Cash payments are not eligible for tax benefits.

Here are the eligibility details to claim tax deductions on the health insurance plan under Section 80D of the IT Act, 1961.

Example: Mukesh is aged 45 years, and his mother is aged 75 years. Mukesh has taken a medical insurance plan for himself and his mother and pays a premium of Rs. 30,000 and Rs. 35,000, respectively. 

Mukesh can claim tax benefits of up to Rs. 25,000 for his policy, and up to Rs. 50,000 for his mother’s policy since she is a senior citizen. Given the cap on tax deductions, Mukesh can claim tax deductions of up to Rs. 60,000 (Rs. 25,000 + Rs. 35,000).

In a multi-year medical insurance plan, the amount of premium remains the same throughout the policy period. Hence, you can protect yourself from a potential increase in premiums during renewals. As for the tax exemption for the multi-year plan, you can claim it every year.

For example: if you have paid Rs. 45,000 for a three-year long-term health insurance plan, you can claim tax exemptions of Rs. 15,000 for each year.

Following are the ways you can pay for the premium of the medical insurance plan. Please note, cash payments will not be eligible for tax benefits.

Here are the benefits of tax deductions on medical insurance.

Here is the health insurance tax benefit under Section 80D for senior citizens (above 60 years and below 80 years) on health insurance premiums.

Medical insurance is necessary and beneficial as you can avail yourself of tax benefits for the premiums you pay. It is essential to understand your needs and then decide if you want to include dependent parents to avail of the maximum tax benefit. Ensure you claim tax exemption while filing the Income Tax Return to not miss out on the benefit.