How to Claim Tax Benefits of Health Insurance
Health insurance plays a key role in an individual’s financial plans. It not only protects you and your loved ones in times of a medical emergency but also ensures you do not face any financial constraints.
Although insurance has become a necessity, many people are not aware of its importance. In order to promote insurance, the Government of India has provided tax benefits on different kinds of insurance, including health insurance tax exemption.
As a taxpayer, here are a few health insurance benefits that you should know.
Tax benefits under Section 80D of the Income Tax Act, 1961
- As per Section 80D medical insurance benefit, if you are below 60 years of age, you may avail of an annual tax benefit of INR 25,000, which includes INR 20,000 against premiums paid and INR 5,000 on preventative health check-ups.
- You may also avail of a tax benefit of INR 30,000 for your parents if they are above 60 years of age and even if they are not dependent on you. This includes INR 25,000 against premiums paid and INR 5,000 on preventative health check-ups.
- If you are 60 years and above and are paying the premium for your parents’ health insurance, then you may avail of a total tax exemption of INR 30,000 annually.
- In case your parents are above 80 years of age, you may claim a tax benefit of INR 35,000 on their health insurance. This includes INR 30,000 against premiums paid and INR 5,000 on preventative health check-ups.
Let us understand this with an example.
Scenario 1
Ramesh is a 45-year old man who has invested in health insurance for himself as well as his parents who are 65 years old. Given this situation, Ramesh may avail of an annual tax deduction of INR 55,000 on the premium payments and preventative health check-ups for himself and his parents respectively.
Scenario 2
Shyam is a 61-year old man who has invested in health insurance for himself as well as his parents who are 75 years old. Given this situation, Shyam can avail of an annual tax deduction of INR 60,000 on the premium payments and preventative health check-ups for himself and his parents respectively.
Scenario 3
Reema Sinha is a 65-year old woman who has invested in health insurance for herself as well as her parents who are 85 years old. Given this situation, she can avail of an annual tax deduction of INR 65,000 on the premium payments and preventative health check-ups for herself and her parents respectively.
A few things to note while claiming for health insurance tax exemptions are as follows:
- You may avail of these deductions only if the premiums are paid via cheque, demand draft, credit card or any other bank transfer. Cash payments are not considered under the purview of tax exemption, except cash paid towards preventative health check-ups up to INR 5,000.
- Tax deductions may not be claimed for past premiums paid or any premiums you are going to pay in the future. This means, if you have invested in a health insurance policy in the year 2016-17, you may only avail of tax deductions within that year.
- You may enjoy tax deductions when you file for annual income tax returns. For this, you would need to fill out the deductions you are eligible for during that particular year and submit the necessary supporting documents.
Investing in a health insurance policy gives you not only protection from huge medical expenses but also savings in the form of tax exemption.
