In this day and age, you cannot do without health insurance. Healthcare costs are rising by the day, and a major illness could cause major damage to your financial health as well. Nothing in life comes free, so you have to pay premiums to avail of health insurance, which can be a bit of a financial burden. However, the government has tried to lighten your burden by offering tax breaks. You can get deductions from taxable income under various sections of the Income Tax Act for the premiums that you pay on health insurance.
The amount of tax deductions will depend on your age, as senior citizens can get more deductions.
Income tax benefit for those under 60
If you are under 60 years of age, you’ll get a deduction of Rs. 25,000 from taxable income in a year for a policy for yourself, your spouse and your children under Section 80D of the Income Tax Act. If your policy includes parents who are under the age of 60, you can get an additional Rs.25,000, taking the total you can claim to Rs. 50,000.
Tax deductions if a parent is over 60
If your policy includes a parent who is above 60 years of age, you will be able to claim Rs.50,000 as deduction. So for a health insurance policy for yourself, your children, and a parent over 60, you will be able to claim a deduction of Rs.75,000.
Tax deductions if you are over 60
If you are over 60, and your health insurance policy includes your parent, you will be able to claim a deduction of Rs. 1 lakh. So the maximum amount of deduction you can claim from a health insurance policy is Rs. 1 lakh per annum.
Deductions for lump sum payment
If you pay the health insurance premium in a lump sum when you take out a policy, the tax benefit will last during the tenure of the policy.
Deductions for couples
If the husband and wife take out separate health insurance policies, both will be able to claim these deductions.
Other deductions available for health purposes
Apart from health insurance premiums, there are certain allowable deductions for health expenses. For instance, under Section 80DD, you can claim up to Rs. 1 lakh for expenses on severely handicapped dependents. For less severe cases, the deductible amount is Rs. 50,000.
Expenses on the treatment on specified diseases (cancer, neurological disorders, kidney failure etc) can be deducted from taxable income up to Rs. 40,000 for those under 60 years, and Rs. 1 lakh for those over 60 years of age.Other points to note
- You will not be able to claim the deductions if you pay premiums in cash. So use a cheque, credit card, debit card or online funds transfer.
- You can claim deductions only on premiums, and not on GST, service charges and so on.
- Add-ons for critical illness cover are also eligible for deduction.
- Group health insurance policies are ineligible for tax benefits.