Tax Benefits on Health Insurance Plans-Section 80D

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Health insurance plans, apart from the covering medical expenses, additionally provide tax benefits. Under section 80D of the income Tax Act, the premiums paid for a health insurance plan are eligible for a deduction, while calculating one’s taxable income. This makes your health insurance plan an ideal and effective tax saving tool. Here are the details on what makes one eligible to avail this tax benefit.

Scope and coverage of Section 80D

Section 80D extends its benefit to health insurance policies that are approved by the General Insurance Corporation or by the Insurance Regulatory & Development Authority (IRDA). Only investments made towards payment of health insurance premiums are eligible for a benefit under the section.

Coverage:

  • In case of an individual, the benefit is applicable for premiums paid for health insurance policy for self, spouse, parents and dependent children. It could be in the nature of an individual or a family floater plan.
  • Children above 18 years, if employed, are not considered as dependents. For female children, not employed, can be covered until the time she is married.
  • When it comes to parents, the benefit is extended to them, even if they are not dependents.
  • In case it is for Hindu Undivided family (HUF), the benefits are for premiums paid for any member of the family.

Quantum of Benefit

The deduction in respect of medical insurance premium under section 80D are as follows.

Benefits for individuals: For an individual the premiums paid for a health plan, in the name of self, spouse or children, entitles an annual deduction of up to Rs. 15,000 from the total taxable income.

Supporting parents: The section extends additional benefits for premiums paid on either parent’s health insurance. This benefit could be availed of irrespective of whether they are actually dependent on you or not.

For parents below 65 years of age: A deduction of Rs. 15,000 could be claimed on premiums paid on behalf of parents. This deduction could be claimed over and above the Rs 15,000 deduction you would be entitled to as an individual.

For parents above the age of 65 years: You could claim an additional deduction of Rs. 20,000 on premiums paid towards parents’ health insurance, over and above the Rs. 15,000 individual deduction. Thus, in such a case the total deduction that could be claimed under Section 80D works out to be Rs. 35,000.

For example: Let us assume you have an individual health plan for yourself. You also are paying the premium for your elderly parents who are 70 years of age. The total benefit you would be entitled to in this case would be as follows

Rs 15,000 (in respect of your individual policy) + Rs.20 000 (additional benefit towards premiums paid for elderly parents) = Rs. 35,000 (Total annual deduction you are entitled to).

  Age of Assessee Deduction towards premium paid for Total deduction entitled under Section 80D
    Self, Spouse, Children

(a)

Parents less than 65 years

(b)

Parents over 65 years of age

(c)

 
Scenario 1 35 years Rs. 15,000 15,000 (a)+(b) = Rs. 30,000
Scenario 2 35 years Rs. 15,000 Rs. 20,000 (a)+(c) = Rs. 35,000
Scenario 3 65 years Rs. 20,000 (a) = Rs. 20,000

Enhanced benefits for senior citizen tax payers: For the elderly tax payers above the age of 65 years the deduction under Section 80D is Rs. 20,000. For the purpose of income tax calculation senior citizen is considered as 65 years of age and above.

Important Points to Note

  • Parents –in laws are not eligible for a deduction under section 80D.
  • Part payment clause: In case of a part payment of premium by you and your parents, a deduction could be claimed by both, to the extent of their individual contribution. The amount should have been paid directly to insurance company.
  • In order to avail of the tax benefit under the section, proof of payment such as premium receipt would have to be furnished.
  • The mode of premium payment should be either in the form of cheque, demand draft, e-transfer or credit card. Premiums paid by cash are not acceptable for claiming tax benefits.
  • The premium paid towards the health plan must be from your taxable income in that year, for which you are filing a claim.

Featured Image: Pixabay

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