Medical emergencies arise without warning. A health insurance policy offers financial coverage to meet such contingencies and cover a significant treatment cost. Medical insurance can equip us with a support system to handle expenses related to critical illnesses like cancer, cardiac arrest, or many other ailments, which can significantly affect our finances. Also, with timely investment in the right health insurance, we can put off the burden of treatment from our shoulders for unforeseen illnesses that have the chance of developing as we age, owing to our lifestyle.
The Indian government offers tax benefits under section 80D on health insurance premium payments to encourage people to secure their health.
What is Section 80D in Income Tax?
Under section 80D of Income Tax, every person or Hindu undivided family can claim tax deductions for health insurance premiums paid in a particular financial year. Deductions are also available for top-up health and critical illness plans.
The expenses that can be claimed for deduction under section 80D include health insurance premiums paid for the taxpayer and their family, medical costs incurred for senior citizen parents and spending on preventive health checkups.
Section 80D deductions are only permitted in cases where the premium has been paid through a method other than cash. The idea is that the premium payment should be made via a bank. The deductions are meant to encourage citizens to stay proactive about health. Through timely check-ups, we can identify illnesses early and mitigate health issues at an early stage.
Who Is Eligible For Deduction Under Section 80D?
Those eligible for tax deduction under section 80D of the Income Tax Act are the following:
- Individuals
- HUF(Hindu undivided family)
Companies, trusts, firms or any other entity are not eligible to claim a deduction under this section.
As per section 80D of the Income Tax Act, taxpayers are eligible to get a deduction of up to ₹25,000 in tax on health insurance premiums paid during every financial year. The amount can increase up to ₹50,000 per financial year if any premium is paid for senior citizens. However, the senior citizen should not have any health insurance to claim this deduction. We can also take advantage of the additional deduction of ₹5000 on the expenses incurred for preventive health check-ups for ourselves, our spouse, our dependent children, or our parents.
Please note that the Income Tax Act does not define the full scope of medical expenditures.
It typically includes the costs of medical consultations, medicines, impairment aids, and more.
In total, a claim for deduction up to ₹1 lakh can be made under section 80D. This covers the premium paid for health insurance policies for ourselves, our parents, spouses, and dependent children and expenses on preventive health check-ups.