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Insurance Article

Tax Benefits from Health Insurance

August 11 2015
Tax Benefits from Health Insurance

Doubly benefit from your insurance policy

Insuring health comes with a distinct advantage of tax benefit. Premium paid on health insurance policy is tax-deductible under section 80D of the Income Tax Act, 1961.

The current law states that an individual or Hindu Undivided Family (HUF) can claim deduction for premium paid on medical insurance policy. Read on to know more.

Amount of Deduction

Deduction is allowed if insurance Premium is paid for medical insurance policy for self, spouse and dependent children. There is an additional deduction allowed for premium paid for policy for parents.

Amount of deduction allowed per annum for 2015-16
Policy for Not Senior Citizen Senior Citizen
Self, spouse and dependent children ₹25,000 ₹30,000
Parents ₹25,000 ₹30,000

Amount paid from

The amount should be paid out of the income chargeable to tax.

Mode of payment

Insurance Premium should be paid by any mode other than by cash. In other words, if insurance premium is paid by cash then deduction is not available.

Super Senior Citizens

For uninsured super senior citizens (age 80 years or more during the relevant year), medical expenditure incurred up to ₹30,000 shall be allowed as a deduction under section 80D. However, total deduction for health insurance premium and medical expenses for parents shall be limited to ₹30,000.

Expenditure on Preventive health check up

A sub limit of ₹5,000 is allowed for deduction for preventive health check-up for self, spouse and dependent children and parents. This can be paid by any mode including cash. However, the upper limit of ₹25,000 (₹30,000 in case of senior citizens) cannot be exceeded.

Example:

An individual pays (through any mode other than by cash) during the year 2015-16 medical insurance premiums as under:

  • ₹17,000 for himself, his wife and dependent children
  • ₹27,000 for his parents
    • According to above provisions, he will be allowed deductions of ₹42,000 (17,000 + 25,000) if neither of his parents are senior citizens.
    • However if any of his parent is a senior citizen, he will be allowed a deduction of 44,000(17,000+27,000).
    • Further, in the above example, if total premium on parents (not senior citizens) is 40,000 out of which ₹27,000 is paid by the son and ₹13,000 by the father out of their respective taxable income, the son will get deduction of ₹25,000 (in addition to deduction of ₹17,000 for the medical insurance on self and family) and father will get deduction of ₹13,000.
    Health insurance provides dual benefits:
  • Financially safeguarding policy takers from sudden medical emergencies and
  • Tax saving

With increase in limits of deduction under section 80D from the year 2015-16, policy takers will benefit with increased tax savings.

Frequently Asked Questions (FAQs)

FAQ 1. Is the assessee (person seeking tax benefit) required to be the proposer of policy?

A. The premium is to be paid to effect to keep the insurance policy active. There is no condition that assessee should be the proposer of the policy.

FAQ 2. Will assessee get benefit of deduction if he/she has partly contributed to premium?

A. Assessee can partly contribute the premium amount but amount should be paid (other than by cash) directly to insurance company (refer above example).

FAQ 3. Is it necessary that parents of the insured are dependent?

A. Additional deduction under section 80D can be claimed irrespective of the fact whether parents are dependent or not.

FAQ 4. Who is a senior citizen?

A. As per section 121 of Finance Act, 2015, one who has completed the age of 60 years at any time during the assessment year is a senior citizen.

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