Health Insurance and Tax Benefits: Understanding Section 80D in India

Having a health insurance policy provides a safety net for you and your family members. In addition to providing financial security, a health insurance policy can also help you save on taxes. To motivate people to buy health insurance policies, the Indian government has introduced tax benefits on health insurance under Section 80D.

The section allows you to claim expenses for health insurance premiums, preventive health check-ups, and medical treatment for senior citizens. The maximum limit of 80D tax benefits is ₹1,00,000 as per the eligibility. Get to know more about deductions under Section 80D, eligibility, and the claim process in this comprehensive guide.

Understanding Eligibility and Tax Benefits

It is vital to understand the eligibility for deduction under this section. HUFs and individuals can claim a deduction. The deduction is applicable for premiums paid for self, spouse, parents, and dependent children. The following table clarifies the tax benefits under each circumstance:

Deduction to Preventive Health Checkups

In the overall deduction limits as specified above, Section 80D permits a special deduction for expenses due to preventive health checkups. It allows claiming up to ₹5,000 deduction in a financial year for premiums paid towards these checkups.

Note that the ₹5,000 limit is not an extra deduction but is covered within the total applicable limits. Essentially, it covers checkups for the individual, parents, spouse, and dependent children. Unlike health insurance premiums, you can pay for preventive health checkups in cash.

Aspects to Note Before Investing in a Health Insurance for Section 80D Deductions:

To gain the 80D tax benefits, here are some key aspects you must be acquainted with:

●        The group health insurance policy offered by your workplace is not eligible for deduction unless you pay the premium out of pocket.

●        You can’t claim tax benefits on behalf of the premium paid for the working children.

●        Cash payment of the premium is not allowed.

●        If it is a partial payment by you and a parent, then both of you can claim a tax deduction, to the limit paid by each.

●        Health insurance premiums are not tax deductible under the new tax regime.

How to Claim Tax Benefits Under Section 80D?

To ensure a successful claim of the deduction, you, as a taxpayer, should comply with specific conditions. These conditions are related to the mode of payment, filing your ITR, and more. So, let’s understand these aspects to ensure a successful claim process.

i) Payment Mode:

Payments can be made in any of the following options except cash:

●        Demand Draft

●        Cheque

●        Net Banking (NEFT/RTGS/IMPS)

●        UPI

●        Credit Card

●        Debit Card

Note: The premium paid for preventive health checkups (up to ₹5,000) can be made in cash and is eligible for deduction under Section 80D.

ii) Multi-Year Policies

Generally, insurance providers provide discounts on premiums if paid for multiple years together. Section 80D ensures clarity on how to claim deductions in these scenarios.

If you opt for a multi-year health insurance policy and you pay a lump sum premium, then you can claim an equivalent deduction for each financial year being covered by the policy. Note that the deduction claimed in any single fiscal year can’t exceed the valid maximum limit under Section 80D for the particular year.

iii) Claiming the Deduction in ITR

The process of claiming the Section 80D deduction is not automatic. You must report it while filing your annual ITR (Income Tax Return). You have to claim it in the applicable schedule of the ITR form (typically under the Chapter VI-A deductions).

You need to fill in details like the premium amount, whether it’s intended for self/family/parents, and whether there are any senior citizens covered or not.

Make sure to keep all required documents ready to submit them with your ITR form. Usually, the documentation includes:

●        Health insurance policy document

●        Bank statements (specifying the transaction of the premium payment)

●        Receipts for medical expenses (if it is claimed for senior citizens without insurance)

●        Receipt for preventive health checkups (applicable if claimed)

Conclusion

Individuals and HUFs in India can make the most of the Section 80D to decrease their tax burden while simultaneously obtaining the coverage. You can get the maximum possible benefits of this provision if you understand its meaning, eligibility for claim, deduction limits, and conditions for paying premiums. The 80D tax benefits not only ensure peace of mind but also contribute to considerable tax savings each year.