Health Insurance Tax Deductible Benefits: What You Need To Know

Understanding Section 80D: Health Insurance Tax Deductible Benefit

The provisions of section 80D describe that when you pay premiums on health insurance policies you have taken in your name, or in the name of your spouse, dependent children, and parents, you can claim deductions on those payments. 

Note: Only premiums paid in non-cash modes, such as cheques or net-banking, will be considered for deduction.

Health Insurance Tax Deductible: Deduction Limits

What are the limits on such deductions? It varies from case to case. Take a look:

1. In the case of policies in your name, or in the name of your spouse and dependent children, you can claim up to the amount of ₹25,000 per year, in total. 
2. If you are above 60 years old, a senior citizen, the amount is doubled to ₹50,000.
3. Additionally, if you have taken policies on your parents, who are senior citizens, the amount rises to ₹50,000. So, in total, the maximum possible deduction under section 80D can go up to ₹1,00,000 (50,000 + 50,000)

Health Insurance Tax Deductible: Preventive Health Check-Ups

You can include amounts paid towards preventive health check-ups in addition to the premium paid. The ceiling of maximum deduction does not change based on this amount. However, a limit of ₹5,000 is set for claiming deductions on such payments. This applies to payments made in cash as well, unlike the premiums, where only non-cash payments are considered. 

Eligibility Criteria

• Who Qualifies: Individuals as well as HUFs (Hindu Undivided Families) can claim tax benefits under Section 80D. 
• Note: Companies and firms are not eligible.
• Eligible Payments: Premiums towards health insurance policies from insurers approved by the Insurance Regulatory and Development Authority of India (IRDAI) qualify. This includes policies for self, spouse, dependent children, and parents.
• Payment Mode: Premiums must be paid via non-cash methods (e.g., credit card, bank transfer) to be eligible, except for check-up expenses.

Health Insurance Tax Deductible: Tax Benefits in Action

For example, if you are 45 years old and pay ₹20,000 as a premium for yourself, your spouse, and children, and ₹30,000 for your senior citizen parents, you can claim:

• ₹20,000 for your family (within the ₹25,000 limit)
• ₹30,000 for your parents (within the ₹50,000 limit)
• Total deduction: ₹50,000
• If you also spend ₹4,000 on a preventive check-up, this can be claimed within the respective limits, bringing potential savings closer to the maximum based on your tax slab.

Health Insurance Tax Deductible: Key Considerations for FY 2024-25

Keep the following things in mind:

• Old vs. New Tax Regime: Section 80D deductions are available only under the old tax regime. If you opt for the new regime, you will forfeit these benefits, so evaluate your overall tax savings before making a decision.
• Policy Coverage: Ensure your health insurance policy is comprehensive, covering hospitalisation, critical illnesses, and pre- and post-hospitalisation expenses. A robust plan maximises both health and tax benefits.
• Documentation: Maintain records of premium receipts, policy documents, and check-up bills. These are essential for claiming deductions and may be required during tax assessments.
• Deadline: Premiums paid between April 1, 2024, and March 31, 2025, qualify for FY 2024-25. Plan payments early to avoid last-minute issues.

Additional Tips

• Multi-Year Policies: If you pay premiums for multiple years in advance, the deduction is available only for the premium component applicable to the current financial year, as per the policy terms.
• Exclusions: Premiums for life insurance, personal accident policies, or non-IRDAI-approved plans do not qualify under Section 80D.
• Senior Citizen Focus: If your parents are senior citizens, prioritise their coverage, as the higher ₹50,000 limit offers greater tax relief.