Tax-Reducing Bills in Health Insurance

Investing in medical insurance not only ensures financial security during medical emergencies but also offers substantial tax benefits. The Indian Income Tax Act allows policyholders to claim deductions on various healthcare-related expenses, reducing overall tax liability. Keeping track of tax-reducing bills and receipts is essential for maximising these benefits. This blog explores the tax benefits available on medical insurance for parents, key bills that help reduce tax liability and the process of maintaining and submitting these documents correctly.

Tax benefits on health insurance

Health insurance policyholders can claim tax deductions under Section 80D of the Income Tax Act. The deductions are as follows:

• ₹25,000 deduction for self, spouse, and dependent children (below 60 years).
• ₹50,000 deduction if the insured person or parents are senior citizens (above 60 years).
• Additional ₹5,000 for preventive health check-ups (within the overall limit).

These tax benefits apply to medical insurance for parents, individual policies and family floater plans.

Bills and receipts that help reduce tax liability

There are several ways to reduce the income tax payable, and out of these, most are unknown to us or often forgotten. Invoices and receipts of various expenses are examples of such commonplace items that can help reduce your tax liability.

Here are 8 invoice-related tax deductions in accordance with The Income Tax (IT) Act 1961, which you can claim to save more this year:

1. Health Insurance Premium Receipts

Payment of medical insurance premium for yourself, your spouse and dependent children qualifies for tax deduction under Section 80D. Likewise, payment of medical or health insurance premium for your parents, whether dependent or not, qualifies as a deduction under this section.

1. Preventive Health Check-up Bills

If you have not yet exhausted your deduction limit under Section 80D and you have a bill for a preventive health checkup, you can claim this bill and get a maximum of Rs. 5,000 as a deduction. This deduction is included within the overall limit of Rs. 25,000 of Section 80D (Rs. 30,000 in case of senior citizens) for the financial year 2014-15.

1. Medical Expenses for Senior Citizens

If parents are above 60 years old and do not have health insurance, medical expenses up to ₹50,000 can be claimed under Section 80D. Bills for doctor consultations, medicines and treatments should be properly maintained. Ensure the receipts contain details like patient name, date and service provided.

1. Critical Illness & Medical Treatment Bills

Tax deductions under Section 80DDB can be claimed for specified critical illnesses like cancer, kidney failure and Parkinson’s disease. The deduction limit is ₹40,000 (for individuals below 60 years) and ₹1,00,000 (for senior citizens). Bills must be supported by a doctor’s certificate from a specialist.

How to maintain and submit tax-reducing bills and receipts?

These simple tips will help you better manage and submit tax-reducing bills on time: 

1. Organise Documents Properly: Keep both digital and hard copies of medical bills and insurance premium receipts.
2. Ensure Receipts Are Valid: Bills should include essential details like provider name, patient name, date and expense breakdown.
3. Use Tax Filing Software: Platforms like ClearTax or official IT portals allow easy submission of scanned receipts.
4. Submit Before the Deadline: Ensure all documents are submitted before the financial year-end to claim deductions.

Common mistakes to avoid while claiming tax deductions

These are some of the mistakes to avoid while claiming a tax deduction:

• Paying Insurance Premium in Cash: Only non-cash transactions qualify for tax deductions.
• Claiming Invalid Expenses: Cosmetic surgeries, alternative treatments (not covered under AYUSH) and over-the-counter medicines do not qualify.
• Failing to Maintain Proper Receipts: Ensure bills are itemised and legible.
• Not Including Medical Expenses for Senior Citizens: Even if your parents do not have insurance, their medical expenses can be claimed.

FAQs

1. Can I claim a tax deduction for my parent’s medical insurance?

Yes, under Section 80D, you can claim up to ₹50,000 if your parents are above 60 years.

2. Are cash payments eligible for tax deductions?

Cash payments are eligible only for preventive health check-ups (₹5,000 limit). Insurance premiums must be paid digitally.

3. What documents are needed to claim tax benefits?

You need premium payment receipts, medical bills, doctor’s certificates (for critical illnesses) and diagnostic reports.

4. Can I claim both insurance premiums and medical expenses for my parents?

Yes, if your parents are above 60 years old and do not have insurance, their medical expenses (up to ₹50,000) can be claimed.

Conclusion

Claiming tax benefits through medical insurance and related healthcare expenses can significantly reduce your tax liability. By maintaining valid receipts and understanding the applicable deductions, taxpayers can maximise their savings. Whether it’s medical insurance for parents or personal health expenses, strategic tax planning ensures financial security while complying with income tax laws.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis, or treatment. Please consult your general physician or another certified medical professional for any questions regarding a medical condition. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.