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Tata Capital > Blog > Insurance > Health Insurance Tax Benefits


Health Insurance Tax Benefits

Health Insurance Tax Benefits

In life, the risk of falling sick, meeting with an accident, or contracting a life-threatening disease is always present. Healthcare costs, including diagnosis, treatment, hospitalization, and medicines, can seriously impact an individual's finances. It can cause a loss of the savings that you accumulated over a long time. To avoid this, it is important to invest in health insurance for yourself and your family to cushion your finances from a sudden impact. But apart from covering your medical expenses, health insurance offers an attractive tax benefit.

In this article, we tell you everything about health insurance tax benefits to help you save your hard-earned money.

Health Insurance Tax Benefits

Section 80D of the Income Tax Act allows tax-payers financial benefits on the purchase of health insurance in two ways:

  1. With insurance cover, you get reimbursable or cashless medical care without impacting finances. The insurance provider takes care of the medical expenses incurred during the insurance period based on the inclusions in the policy terms.
  2. You save money by claiming a tax deduction for the premium paid for the health insurance (up to a specific limit) when filing your annual income tax return.

The medical insurance tax benefit is one of the ways government encourages the public to buy health insurance. To understand how it works, let's take an example.

Suppose a person buys a health insurance policy with an annual premium of Rs. 10,000 that gives him coverage of Rs. 10 lacs. Now, he gets sick and avails of the health insurance claim to pay for a medical expense of Rs. 75,000.

In such a case, the health insurance service provider will reimburse Rs. 75,000 (after deducting some nominal processing charges). Also, while filling out the annual income tax return, the individual files Rs. 10,000 (yearly health insurance premium) under section 80D to claim tax deductions. So, this Rs. 10,000 amount will be deducted from his taxable income (subject to certain limits).

This way, he saves money by getting reimbursement for medical expenses and by saving through a tax deduction.

Also, suppose you buy tax-saving health insurance with additional riders (extra benefits at a nominal charge) or critical illness coverage. You can claim medical insurance tax benefits on these too.

What is the health insurance tax benefit 80D limit?

Tax rebate on health insurance has a limit and comes with specific terms and conditions:

  • This limit is according to the age of the primary policyholder.
  • This limit depends on who is the policyholder you are paying a premium for.
  • Here is the deduction that is allowed according to the age of the policyholder:
 Deduction Allowed (in Rs.)Deduction Allowed (in Rs.)Total Deduction Allowed (in Rs.)
 People Covered and Age FactorSelf, spouse, and dependent childrenParents 
You: Less than 60 yearsFamily: Less than 60 yearsParents: Less than 60 years25,00025,00050,000
You: Less than 60 yearsFamily: Less than 60 yearsParents: More than 60 years25,00050,00075,000
You: More than 60 yearsFamily: Less than 60 yearsParents: More than 60 years50,00050,0001,00,000
  • Non-Resident Indians (NRIs) can also avail a maximum deduction of Rs. 25,000 (irrespective of age) if they buy a health insurance policy in India for themselves or their parents.
  • The IT Act also provides benefits for the Preventive Health Check-up (PHC) if you do not meet the above income tax deduction limits.
    • For policyholders below 60 years: Rs. 5,000
    • For policyholders above 60 years: Rs. 7,000.

Personal factors to consider while getting your health insurance

Many critical individual factors decide if you are eligible for tax saving health insurance and how much coverage you can get from the insurance service provider.

  • Amount of coverage you need for yourself and your family.
  • Your current age, health, lifestyle, existing illnesses, etc.
  • The cost of treatment for common diseases.
  • The hospitalization costs.
  • Your annual earnings.
  • The healthcare needs of other family members.

Important points to check about the Insurance Provider

Before you finalize your insurance provider, please check the below details get hassle-free services from the insurer:

  • Reliability of the insurance provider and claim settlement ratio.
  • The features provided in the policy, along with various riders.
  • The diseases and procedures covered in the health insurance policy.
  • The pre and post-hospitalization charges, hospital room rent, ambulance charges, etc.
  • Waiting period for some specific illness.
  • The network coverage for the cashless hospitals.
  • Availability of your preferred facilities in the covered hospitals.
  • The minimum and maximum age to start the policy.
  • Provision of providing no claim bonus.

What are the exclusions?

The Income Tax department can disqualify you from getting the tax rebate on health insurance in the following conditions under Section 80D:

  • If you don't pay the premium during the relevant financial year.
  • If your claimed deduction exceeds the limits mentioned in the Income Tax Act.
  • If you pay the premium in cash.
  • If a premium payment receipt is not available.
  • If someone else pays the premium.
  • If you pay the premium for in-laws, siblings, friends, etc.

What documents are required to get the tax benefit?

To claim medical insurance tax benefits, you need the following documents:

  • Premium payment receipts for the health insurance policy for which you claim tax benefits.
  • Policy documents of the health insurance as proof of purchase and coverage.
  • Preventive health check-up receipts.

Please note that these documents are not required while filing your tax return. However, it would help if you kept them handy for any unforeseen scrutiny.

Types of health insurance policy riders

There are many riders (additional benefits) that you can choose (additional charges) while buying your health insurance:

  • Family floater
  • Critical illness cover
  • Personal accident cover
  • Specific disease cover
  • Maternity health cover
  • Hospital room rent waiver

Your medical insurance safeguards you from the financial impact that can strike unannounced. But at the same time, it offers you health insurance tax benefits.

Visit the Moneyfy website or download the Moneyfy app to learn more about various health insurance policies.

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