Health Insurance: How to Claim Tax Benefits on the Premiums Paid

Posted on: Dec 9, 2021 | 3 mins | Written by: HDFC ERGO Team

Health Insurance: How to Claim Tax Benefits on the Premiums Paid

Taking health insurance at an early age is probably one of the wisest decisions you can make.Also, since everything is digitalised these days, you can easily buy online health insurance with minimum documentation. A health plan covers medical emergencies as well as planned procedures. Hence, you can opt for the best treatment without worrying about the bills. And considering the ever-increasing healthcare costs, paying a small premium against your health plan is better than bearing the entire treatment cost on your own.

Moreover, as per Section 80D of the Income Tax Act 1961, you can enjoy health insurance tax benefits on the premiums paid towards your health plan. This includes premiums paid for critical illness insurance and top-up plans as well. So, if your annual income is taxable, you caneasily claim tax deductions on health insurance premiums. Read on to understand this better.

What is health insurance premium?

Health insurance premium is the amount you pay to the insurance company against your health plan for coverage against medical expenses. Timely payment of premiums is important to keep your policy in action.

Insurance companies offer health plans for 1-3 years with different premium payment terms. If you buy online health insurance for 1 year, you must pay the premium annually to keep the policy active. In case you opt for a two or three-year insurance plan, you must pay the premium for two or three yearsat the time of purchasing the policy and then on or before the renewal date or within the grace period (usually 30 days). If you fail to pay the premium even during the grace period, your health plan will lapse.

Here’s a look at the tax deductions available under Section 80D of the Income Tac Act 1961:

Individuals Covered	Premium Paid (INR)		Tax Deduction under Section 80D (INR)
	Individual, family, children	Parents
Individual, family and parents below 60 years	25000	25000	25000+25000 =50000
Individual and family below 60 years, parents above 60 years	25000	50000	25000+50000 = 75000
Individual, family and parents above 60 years	50000	50000	50000+50000 = 100000
Non-resident individuals and members of HUF	25000	25000	25000+25000 = 50000

Examples of tax benefits for a single year and multi-year plans:

• Single year plan:

Mr A is 40 years old and his mother is aged 65. He pays a premium of INR 35000 and INR 40000 for their respective health plans. Considering the cap on tax deductions, he can avail tax benefits of up to INR 25000 for the premium paid on his policy and up to INR 50000 on his mother’s. Hence, he can claim total tax deductions of up to INR 25000+40000 = INR 65000 on both health plans.

• Multi-year plan:

Mr A has taken a 3-year health insurance policy for himself (40 years old) and his mother (65 years old). He pays a premium of INR 60000 for his plan and INR 90000 for his mother’s. Hence, he can claim tax benefits of INR 20000+30000 = INR 50000 each year.

Steps to claim tax benefits on health insurance premiums

Here are the steps you must follow to claim tax benefits on your health plan:

1. When you are filing your income tax returns, select Section 80D under the ‘deductions’ column.

2. Next, you will see a drop-down menu with seven options. You need to select the correct option or criterion under which you are claiming the tax deduction. The seven options are:

• Self and family

• Self (above 60 years) and family

• Parents

• Parents (above 60 years)

• Self and family with parents

• Self and family with parents above 60 years

• Self (above 60 years) and family with parents above 60 years

3. You must now attachcopies of your health insurance, premium payment receipt and other supporting documents that the IT department may require to verify the tax deduction.

4. If everything looks fine, you can enjoy tax deductions of up to INR 25000 on health plans for individuals below 60 years of age. Senior citizens (60+) can enjoy tax benefits of up to INR 50000 on their health plans.

It is important to note that you can claim tax deduction on your health insurance policy only if you submit all supporting documents. Also, you must pay the premium online or through a cheque or draft,since policyholders who pay premiums in cash will not receive tax benefits.

Conclusion

Considering a rise in the incidence of lifestyle diseases and infections, taking health insurance will help you avail quality and timely treatment whenever required. In case of hospitalisation, the insurer will cover your medical expenses up to the sum insured and save you from financial setbacks. What’s more, you can also avail tax deductions on health insurance premiums and save some money. If you don’t have a health plan, take the help of an agent or buy online health insurance without delay.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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