Health insurance is not only a necessity but also a smart investment. It protects you and your family from the financial burden of healthcare expenses in case of illness or injury. But did you know that health insurance also offers tax benefits under several sections of the Income Tax Act 1961? This blog will explain how you can save tax by buying health insurance for yourself, your dependents, and your employees.

Section 80D: Deduction for Health Insurance Premium

What is Section 80D?

• • Section 80D allows individuals & Hindu Undivided Families (HUFs) to claim deductions for medical insurance premiums paid during the financial year.

• • This deduction is available not only for regular health insurance policies but also for top-up health plans and critical illness plans.

• • Importantly, it is over and above the Rs 1.5 lakh limit claimed under Section 80C of the Income Tax Act.

Who is Qualified for Deduction Under Section 80D?

• • Individuals & HUFs are eligible for this deduction.

• • Entities such as companies or firms cannot claim this deduction.

What Expenses Are Allowed as Deductions Under Section 80D?

1) Medical Insurance Premiums:

You can avail tax deductions for health insurance premiums paid for yourself, your spouse, dependent children, and parents.

The limits are as follows:

• • Up to ₹25,000 for self, spouse, dependent children, or parents (if they are not senior citizens).

• • Up to ₹50,000 if your family or parents are elderly (aged 60 years and above).

2) Preventive Health Checkups:

• • Cash payments for preventive health checkups are allowed.

• • You can claim up to ₹5,000 for yourself, your spouse, dependent children, or your parents.

3) Medical Expenses for Senior Citizens:

• • Senior citizens (aged 60 years or above) who do not have health insurance can claim a tax deduction of up to ₹50,000 on medical expenses incurred.

• • These expenses typically include medical consultations, impairment aids, medications, etc.

4) Contribution to CGHS/Notified Scheme:

• • Individuals can avail of a deduction of up to ₹25,000 for contributions made to the CGHS (Central Government Health Scheme) or any additional notified scheme.

• • Contributions made on behalf of parents are not eligible for this deduction.

Section 80DD: Deduction for Treatment of Disabled Dependents

Section 80DD offers deductions for the medical expenses spent on treating a dependent who has a disability. The tax deduction limit is

• • ₹75,000 for disability of 40% or more but less than 80%.

• • ₹1,25,000 for severe disability (80% or more).

This section aims to provide financial relief to those responsible for caring for a disabled dependent. It recognises the additional expenses that come with disability and provides a tax benefit to offset these costs.

To claim this deduction, you must obtain a certificate from a medical authority certifying the dependent’s disability. You must also provide the details of the medical expenses incurred and the certificate number in your income tax return.

Section 80DDB: Deduction for Treatment of Specific Illnesses

Section 80DDB offers deductions for expenses incurred to treat specified diseases such as cancer, AIDS, neurological diseases, etc. The deduction limit is:

• • ₹40,000 for individuals below 60 years.

• • ₹1,00,000 for senior citizens.

This provision acknowledges the high cost of treating certain diseases and aims to alleviate the financial burden on individuals and families dealing with these health issues.

Group Health Insurance

Group health insurance can offer tax benefits to both the employer or the organisation and the employee or the member. The premium paid by the employer or the organisation is deductible from their taxable income as a business expense. The employee or the member can also deduct their share of the premium from their taxable income under Section 80D if they pay it from their own pocket.

However, some conditions must be fulfilled to claim tax benefits under Section 80D for group health insurance plans. These are:

– The plan should cover only the employee or the member and their spouse, children and parents.

– The employee or the member should have valid proof of payment for their share of the premium.

– The employee or the member should not claim any other deduction under Section 80D for any other health insurance plan.

Conclusion

As you can see, health insurance offers multiple tax benefits that can help you save money & reduce your tax liability. It also gives you peace of mind and security during medical emergencies. Therefore, buying a suitable health insurance plan that meets your needs and budget is advisable. You can compare a variety of health insurance plans online & choose the best one for yourself and your family.By selecting a health protection plan like the CarePal Secure that offers comprehensive coverage, benefits like unlimited teleconsultations, discounts on medicines and lab tests, and a hassle-free claims process, you can ensure financial security for yourself & your family in case of medical emergencies while also optimising your tax savings.