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How To Claim Tax Benefits on Health Insurance Premiums?

Team AckoMay 25, 2021

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.

Health Insurance Tax Benefits and Deductions

Tax Benefits on Health Insurance:

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.

How to Claim Tax Benefits on Health Insurance Policy?

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.

  • While filing your ITR, under the ‘Deductions’ column, you need to select 80D to claim tax deductions on medical insurance premiums.

  • Choose the criteria under which you are claiming the deduction. Here are the criteria that you can choose from.

    • Self and Family

    • Self (Above 60 years) and Family

    • Self + Parents

    • Parents (Above 60 years)

    • Self, Family, and Parents

    • Self, Family, and Parents Above 60 years

    • Self (Above 60 years), Family, and Parents Above 60 years

  • Attach supporting documents (the receipt of the premium payment) for the Income Tax Department to assess the documents.

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.

Eligibility to Claim Tax Deductions on Medical Insurance:

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

  • Individuals who have bought medical insurance for themselves, spouse, dependent children, or parents

  • Member of a Hindu Undivided Family (HUF)

Scenario Tax Deductions Under Section 80D
Self and Family (All below 60 years) Rs. 25,000
Self and Family + Parents (All below 60 years) Rs. 25,000 + Rs. 25,000 = Rs. 50,000
Self and Family (Below 60 years) + Senior Citizen Parents Rs. 25,000 + Rs. 50,000 = Rs. 75,000
Self and Family (Eldest is above 60 years) + Senior Citizen Parents Rs. 50,000 + Rs. 50,000 = Rs. 1,00,000

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).

Tax Benefits for Multi-year Health Insurance Policy:

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.

Health Insurance Premium - Mode of Payment:

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.

  • Online - Net Banking (Debit/Credit)

  • Cheque

  • Cash

  • Demand Draft

Advantages of Claiming Tax Deductions on Health Insurance:

Here are the benefits of tax deductions on medical insurance.

  • Saves money

  • Increases take-home salary (salaried individuals)

  • Claim tax benefit of up to Rs. 1 lakh

Health Insurance Tax Benefit for Senior Citizens

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

  1. Claim tax exemption of up to Rs. 50,000 for every financial year.

  2. Claim tax exemption of up to Rs. 5,000 on preventive health check-ups for every financial year.

Conclusion:

Health 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.

Frequently Asked Questions:

Here are some of the common questions about tax exemption on health insurance policy.

How do I claim tax exemption under Section 80D of the IT Act for preventive health check-ups?

Under Section 80D of the IT Act, you can claim a tax exemption of up to Rs. 5,000 for the payment towards preventive health check-ups in a financial year. The tax deduction should be within the specified limit of Rs. 25,000 or Rs. 50,000 based on the eligibility. For example, if you are not a senior citizen and paying Rs. 20,000 as premium towards the health insurance plan, you can claim tax exemption on preventive health check-ups of up to Rs. 5,000.

What documents are required to be submitted to avail tax benefits on health insurance premiums?

The premium payment receipt and the health insurance policy copy are required while filing Income Tax Returns. If you have paid a premium towards your parent’s coverage, you need to procure the 80D certificate from the insurer, in this case, ACKO.

What documents are required to claim tax exemption for preventive health check-ups under Section 80D of the IT Act?

You do not have to submit any document for claiming the tax deduction while filing the ITR. However, you should retain the receipt of the payment for future reference.

Can I claim tax benefits from more than one medical insurance policy?

Whether you have one or more health insurance policies, the maximum you claim as tax benefit is Rs. 25,000, and if you or your spouse are senior citizens, you can claim up to Rs. 50,000.

Who can claim tax benefits under Section 80D deduction?

Individuals, including Non-resident Indians (NRIs) and Hindu Undivided Family or HUF, can claim tax exemption under Section 80D of the IT Act.

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