
The coronavirus pandemic has compelled many people to give due importance to quality health insurance as entire families may need it at once. While COVID-19 could be a trigger, the risk of other fatal diseases is not receding too, so having a comprehensive health cover is a must in current circumstances. The added advantage is the opportunity to save significant tax on the premium you pay for a health insurance policy. The income tax benefit on the premium could serve as further motivation to get an adequate health cover. The tax deduction on health insurance premium is available not only on the policy that you buy for yourself or a family floater covering spouse and children, but also the one you buy for your parents -- dependent or not. We give you details:
Tax deduction under section 80-D
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Income-Tax deductions under section 80-C are the most popular. However, the maximum 80-C deduction limits to Rs 1.5 lakh. The benefit with health insurance premium is it is over and above what is available under section 80-C. The premium paid towards health insurance qualifies for deduction under Section 80D of the Income Tax Act. The quantum of the same depends on the age of the policyholder in case of individual policies and the eldest family member in case of a family floater policy.
An individual policy or a family floater
If you are below the age of 60 years and buy an individual policy or a family floater covering your spouse and children, the tax deduction will be available up to Rs 25,000 per annum. If you have parents below the age of 60 years, and you buy a separate policy for them, you get additional tax deduction of Rs 25,000. If parents are above the age of 60 years, the tax deduction in a year could go up to Rs 75,000 (Rs 25,000 plus Rs 50,000). If you are also 60-plus, the maximum deduction that you can avail is Rs 1 lakh (Rs 50,000 plus Rs 50,000).
If you buy the policy for your parents, make sure that you have made the payment from your own account. "The deduction is allowed to the individual who pays the premium. In case you have made the payment, you can submit the health insurance receipt in the name of your parents and claim the deduction," says Archit Gupta, Founder and CEO, Cleartax.
Husband and wife taking separate policies
If you and your wife buy two separate individual or floater policies, the tax deduction of Rs 25,000 each will be available to both of you.
If husband and wife both have family floater policies with their respective parents, then how will the maximum tax benefit under section 80-D work out?
"The husband can claim a maximum deduction of up to Rs 50,000 for the family floater including his parents. Similarly, the wife can also claim a deduction for the family floater insurance paid including her parents," explains Gupta.
Multi-year premium payment in one-go
Gupta says the health insurance premium paid for a two-year policy can be apportioned between the two years. "The tax deduction claim is available for both the years equally, within the limits specified under section 80D." The same holds true for the multi-year policy too. You can claim it by equal proportion each year through the policy period.
Note that a critical illness or a medical insurance rider in a life insurance policy also qualifies for tax deduction under section 80(D).
While the core purpose of the insurance is to protect your pockets from sudden medical expenses, the tax benefit on premium payment up to Rs 1 lakh as per eligibility is indeed an icing on the cake that you should avail.
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