Tax Benefits of Health Insurance Plans

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Health Insurance Tax Benefits

If you have been working for a few years, this would be well known to you. But there are many other lesser-known health insurance tax benefits. Not being aware of these could disqualify you for availing tax benefits on your policy, so #ThinkAhead and read on to know more about health insurance income tax deductions.

What are the Tax Benefits of Health Insurance?

Health insurance is one of the primary investments for any individual to ensure complete security during medical emergencies for themselves and their families. Health insurance plans do not stop with just helping you save big on medical expenses; they offer attractive tax benefits too. There are many who invest, even in life and health insurance, for the tax benefits. So, is health insurance tax deductible?

Yes, it is! Health insurance offers tax benefits on the premium amount paid. Your health insurance premium is tax-deductible under Section 80D of the Indian Income Tax Act. That means, the amount you pay as a premium for your health insurance coverage can be deducted from your taxable income (subject to certain limits). This ensures that your taxable income, and thereby your applicable tax, goes down.

Let us look at these health insurance tax benefits in detail.

Tax Benefits in Health Insurance Through Tax Section 80D of the Income Tax Act

A health insurance policy is a wise choice at any age. It is an affordable way to safeguard yourself and your family from sudden medical expenses. Several types of health insurance policies are available, depending on your unique requirements. You can opt for both individual and family insurance plans at TATA AIG.

The MediCare policy is an affordable basic plan in which coverage from as low as ₹2 lakhs to ₹20 lakhs is available. The MediCare Premier and MediCare Protect policies have additional features to cover high-end diagnostics, air ambulance services, bariatric surgery, and pre and post-hospitalization expenses. A family floater policy will extend the coverage to your family members. Hospitalisation and the cost of medicines can dent your finances, but with Tata AIG health insurance policies, your bills would be taken care of. Besides the peace of mind that any medical emergency, including COVID-19 related, can be met effectively with our policies, the premium you pay is also eligible for a tax deduction in a financial year. Health insurance tax benefits are available according to the premium paid.

The Income Tax Act allows the deduction for premium on health insurance through tax Section 80D. The mediclaim deduction is available on premiums paid for self, family and dependent parents. The maximum amount of deduction on premiums paid for self (if senior citizen) and family plus premiums paid for separate health insurance for parents (if senior citizens) could be ₹1,00,000 per year.

As the health insurance income tax deduction is quite substantial, it reduces the money outflow for taxes in the financial year for which tax is computed.

Premiums Paid on Critical Illness and Riders

The premium paid on family floater plans- that typically cover your spouse, children and any dependent parents- qualifies for health insurance income tax deductions. However, it’s also important to note that any insurance add-ons or ‘riders’ purchased with your existing policy and critical illness cover can also be claimed as part of your overall health insurance tax benefit.

How Much Health Insurance Tax Benefit Under Section 80D Can be Claimed by You?

As a measure to encourage people to opt for sufficient health insurance coverage, the Income Tax Act specifies deductions for two kinds of premium payments: on a policy for self and family and on a policy for dependent parents. Therefore, medical insurance premiums under 80D can be claimed on the individual as well as family health policies.

Hindu Undivided Family (HUFs) and Non-Resident Indians (NRIs) can also claim health insurance income tax deductions for policies purchased in India.

The deduction reduces the taxable income. Health insurance tax benefit under 80D is expected to increase awareness of the need for health insurance coverage among the public. Many people are not clear whether health insurance is tax-deductible and how much is the health insurance tax benefit under 80D.

Let us look at how much health insurance income tax deduction you can get:

  1. The mediclaim deduction limit is dependent on the age of the primary policyholder of the policy.
  2. You can claim a health insurance income tax deduction for an individual/family floater policy bought for you/you+family, along with for a separate health insurance policy bought for dependent parents where you are paying the applicable premiums.
  3. For policyholders who are less than 60 years of age, the maximum mediclaim deduction limit is ₹25,000.
  4. For policyholders who are above 60 years of age (senior citizens), the maximum mediclaim deduction limit is ₹50,000.
  5. Hindu Undivided Family (HUF) can claim a maximum deduction of ₹25,000 (if the Karta is below 60 years of age) and ₹50,000 (if the Karta is a senior citizen).
  6. Non-Resident Indians (NRIs) can claim a maximum deduction of ₹25,000 (irrespective of age) if they buy a health insurance policy in India for themselves or their parents.
  7. The Preventive Health Checkup (PHC) allowance is available only if you do not meet the aforementioned mediclaim deduction limits.
  8. The PHC limit for policyholders below 60 years of age is ₹5000, and for senior citizens, it is ₹7000.

Preventive Health Check-ups

Regular health check-ups help identify potential health risks before they become an issue. Preventive health check-ups also qualify for health insurance tax benefits.

You can claim a tax deduction on preventive health check-ups of up to ₹5,000 per year for parents who are 60 years or below. For those above 60 years, the limit goes up to ₹7,000. The Preventive Health Checkup (PHC) allowance is available only if you do not meet the aforementioned health insurance income tax deduction limits.

Under Tata AIG MediCare Health Insurance Policy, your expenses for a preventive health check-up up to 1% of the sum insured, subject to a maximum of ₹10,000 per policy, are covered. However, this benefit only kicks in after two years of not making a claim on your policy- another reason to stay healthy!

Health Insurance Income Tax Deductions: A Comprehensive Table

Let us understand the table with two examples:

Situations 1 2 3 4 5
Health Insurance Purchased For 1. Self (below 60 years of age) + family

2. Parents (below 60 years of age)
1. Self (below 60 years of age) + family

2. Parents (above 60 years of age)
1. Self (above 60 years of age) + family

2. Parents (above 60 years of age)
Hindu Undivided Family (HUF) Non-Resident Indians (NRIs)
Deduction for Insurance Premium Under Section 80D Self + Family ₹25,000 ₹25,000 ₹50,000 ₹25,000 ₹25,000
Parents ₹25,000 ₹50,000 ₹50,000 ₹50,000 --
Claim Limit for Preventive Health Checkup Self + Family ₹5,000 ₹5,000 ₹7,000 ₹5,000 ₹5,000
Parents ₹5,000 ₹7,000 ₹7,000 ₹7,000 --
The ceiling of Mediclaim Deductions Available Under Section 80D ₹25,000 + ₹25,000 = ₹50,000 ₹25,000 + ₹50,000 = ₹75,000 ₹50,000 + ₹50,000 = ₹1,00,000 Either ₹25,000 or ₹50,000 ₹25,000

Example no 1:

Mr Kumar is 30 years old. He has a family floater health insurance policy for himself, his wife and 1 child, for which he pays ₹18,000 as a premium. He also bought a separate senior citizens’ health plan for his parents for a premium of ₹14,000. The total premium he pays is ₹32,000, which is well within the ₹75,000 limit he has as per Scenario 2 in the table above.

Being a diabetic, he undergoes a PHC every year for ₹3500. His parents also undergo a PHC for ₹6300. The total PHC amount is ₹11,800. Adding total premium plus total PHC amounts, Mr Kumar pays ₹43,800, which is again within the limit of ₹75,000. So, he can claim the entire ₹43,800 as a health insurance income tax deduction under Section 80D.

Example no 2:

Mrs Malik is 32 years old and has a family floater policy covering herself, her husband and 2 daughters. She pays a premium of ₹28,000 for her family health plan. She has dependent parents aged 57 and 58 years of age. She pays a premium of ₹25,200 for a separate policy for her parents. The total premium outflow for Mrs Malik is ₹53,000, which is above her limit of ₹50,000 as per Scenario 1 in the table above.

Thus, despite paying higher premiums, Mrs Malik can only claim a maximum deduction of ₹50,000. If any member of her family undergoes a PHC, she cannot claim that as a health insurance income tax deduction as she has already exhausted her deduction limit.

Mode of Payment of Health Insurance Premiums

Another reason to go cashless! In order to qualify for tax deductions on health insurance under Section 80D on the premium paid, you need to use modes of payment such as cheque, bank draft, credit or debit cards. So, if you pay your health insurance premium in cash, you cannot avail of any mediclaim deductions on your policy.

However, you can pay for your preventive health check-up in cash and still qualify for a health insurance income tax deduction.

Health Insurance Tax Benefits on Multi-Year Policies

Since claiming Health insurance tax benefit under 80D is an annual process, you may have assumed that a multi-year health insurance policy does not qualify you for mediclaim insurance tax benefits, but it does. The deduction is calculated proportionately over the policy term, and a certificate mentioning the amount you’ve already claimed is issued by the insurer.

Health Insurance and Tax Saving: What are the Exclusions?

To get health insurance tax benefits, the premium payment should comply with the conditions laid down in Section 80D. However, in the following conditions, the health insurance tax benefit under 80D is not allowed:

  • The health insurance premium is not paid within the financial year.
  • The premium has been paid in cash.
  • The receipt for the premium payment is not available.
  • The premium has been paid by another on behalf of the person claiming the deduction. That is, the premium should be paid out of the taxable income of the person who wishes to avail of the deduction.
  • The premium has been paid for the health insurance policy of in-laws, siblings, friends etc.
  • The deduction claimed is not as per the limits given in the Act.
  • The maximum deduction on premium for policies is limited to the amounts specified in Section 80D, even if you have paid more.

Therefore, you should take steps to renew the policy within the financial year and use cheques or online payment methods. The documentary proof for the payment and the policy renewal should be readily available while claiming the mediclaim deduction.

Factors to be Considered while Finalising a Health Insurance Plan

Along with the medical insurance tax benefits, a health insurance plan is an important support for funds during a medical crisis, you should determine an appropriate amount of coverage. You should look at the reliability of the insurance provider and the features offered in the health insurance policy. Additionally, you should consider the various factors that could affect your health course in the coming years and determine the coverage. Instead of the cheapest health insurance policy and simply buying a policy for the health insurance income tax deduction, look for the most cost-effective and feature-rich one.

Personal Factors You Must Consider:

  • Current age, current health condition, lifestyle habits, pre-existing illnesses, hereditary medical conditions etc.
  • Cost of treatment of common illnesses that can strike considering your lifestyle, including coronary bypass surgery, knee replacement, gastrointestinal surgery, and so on
  • Post-hospitalization expenses
  • The hospitalisation or health care expenses in the medical facilities of your choice
  • Your annual income
  • Health care needs of other family members: premium on medical insurance for parents has tax benefits

Insurance Policy and Provider Factors You Must Consider:

  • The claim settlement ratio of the health insurance provider and the ease of the claim settlement process.
  • List of illnesses, procedures and medical conditions covered under the policy.
  • Waiting periods for the illnesses as prescribed under policies.
  • The network of cashless hospitals covered by the insurer and whether your preferred medical facilities are covered.
  • The expenses covered under the policy - pre and post hospitalisation, room rent, ambulance charges, alternative medicines and so on.
  • Availability of riders and top-up premiums or plans.
  • Minimum and maximum age of entry.

The baseline for personal health coverage should not be less than 50% of your annual income. As a conservative estimate, the minimum amount of coverage should be ₹5 lakhs per year. You should consider a similar amount for the family members in a family floater policy.

For coverage during the recovery phase, you can opt for riders to the base policy to help you meet the cost of medicines, rehabilitation, post-operative care, etc. Therefore, your premium will vary according to whether you choose a basic policy or one with additional features.

Is health insurance tax-deductible? Yes! Is that the only factor you should consider when buying a policy? Definitely not! While the health insurance tax benefit under Section 80D is a major incentive, always find policies based on your ‘insurance’ needs and budget, rather than focusing only on tax-saving.

At TATA AIG, policies providing basic cover as well as for 12 critical illnesses and pre and post-hospitalization expenses are offered. You can also choose AYUSH treatment, which is covered under our policies. With the super top-up facility, you can increase the coverage amount for an affordable premium.

What Documents do I Require to Claim Medical Insurance Tax Benefits under Section 80D?

The mediclaim deduction for premiums under Section 80D is available according to the prescribed limits of ₹25,000, ₹50,000, ₹75,000 or ₹1,00,000. Along with claiming the correct amount according to the policy, some documents are necessary as proof to allow the deduction:

  • The full receipt for the payment of the premium. The online receipt downloaded from the insurer’s website can be used.
  • The date on the receipt should fall within the financial year for which tax is computed.
  • The receipt should clearly show the date on which the premium was received, the amount and the mode of payment.
  • Cash receipts for the premium payment will not be allowed.
  • Temporary receipts given by agents cannot be used to claim a tax deduction.

Top Reasons Why You Should Get Your Health Insurance from TATA AIG

Along with the health insurance tax benefit, the right health insurance provider can make all the difference in coping with a medical contingency. With TATA AIG, you have the following advantages:

  • Best possible coverage with policies that can be tailored to your needs. We offer affordable policies for coverage starting from ₹2 lakhs to even ₹50 lakhs
  • A wide network of nearly 7200+ hospitals means you can get medical treatment in good hospitals across the country
  • 24X7 assistance in application and claim processing
  • Digital processes so that claiming under the policy is easy, especially when you are pressed for time
  • Online health insurance premium calculator and application process for convenience
  • No sub-limit on room rent and no co-payment, which means you don’t have to pay out of your pocket if the amount is covered by the sum insured
  • The TATA promise of customer-centric values and ethics
  • An industry-leading claim settlement ratio to prove our commitment to accepting valid claims and processing them quickly
  • Applicable tax benefits for the premiums paid under the health insurance tax Section 80D.

Frequently Asked Question

Can you get health insurance tax benefits?

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The premiums paid for a health insurance policy is tax-deductible under Section 80D of the Indian Income Tax Act.

Can you avail health insurance tax benefits under Section 80D?

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Yes! Health insurance as well as health-based riders available with life insurance plans are tax-deductible under Section 80D of the Income Tax Act.

What are the health insurance income tax deduction limits for senior citizens/parents?

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A policyholder above 60 years of age can claim a maximum tax deduction of ₹50,000 on the payment of health insurance premiums (inclusive of the Preventive Health Checkup Limit of ₹7000).

Who receives health insurance tax benefits under Section 80D? Am I eligible to avail tax deduction under the Section?

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The following categories of people can apply for a tax deduction for health insurance premiums paid:

  1. Individuals
  2. Hindu Undivided Family (HUF)
  3. Non-Resident Indians (NRIs)

So, if you belong to one of the above categories and have purchased an individual health insurance policy, a family floater policy or a senior citizen health plan for your parents, you can claim deduction under Section 80D

What are the varied mediclaim deduction limits for mediclaim/health insurance premiums based on age?

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You can claim a health insurance tax deduction of

  • ₹25,000 if you are below 60 years of age
  • ₹50,000 if you are above 60 years of age

You can additionally claim a Preventive Health Checkup deduction of:

  • ₹5000 if you are below 60 years of age
  • ₹7000 if you are above 60 years of age

The PHC deductions are applicable only if you have not exhausted your limits of ₹25,000 or ₹50,000.

What are the critical factors to remember when claiming a health insurance income tax deduction under Section 80D?

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  • Pay the health insurance premium through cheque, demand draft, net banking, bank transfers and so on. Cash payments are not eligible for deduction under Section 80C.
  • The payment should be made within the financial year for which deduction is claimed.
  • The premium should be paid from the taxable income of the one claiming the deduction.
  • There should be a valid payment receipt present with the correct date and amount.
  • The claimed deduction amount should be within the prescribed limits of ₹25,000 or ₹50,000.

How can I buy a health insurance policy?

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You can easily purchase a health insurance policy from the TATA AIG website. Just log in and choose the persons you wish to include in the coverage. State your preferences in the policy, and the online calculator will give you the best quote for premium. Once you submit the proof documents and make payment, you can download the policy document from your email. You can use the soft copy to get the claim processing carried out by the TPA at the hospital.

What are the add-ons that are available with TATA AIG health insurance?

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In the individual health insurance plans, you get high-end diagnostics, dental OPD treatment, emergency air ambulance, cost of consumables, top-up against deductibles, and for treatment overseas are some of the attractive riders available with TATA AIG health insurance policies.

How do pre-existing disease affect the premium?

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A pre-existing disease is a medical condition that you are diagnosed to have or are undergoing treatment at the time of purchasing the policy. At TATA AIG, pre-existing diseases are covered after the waiting period. Please refer to the policy documents for the specific details on the coverage.

How can I approach customer support in TATA AIG?

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The health insurance customer support at TATA AIG is available round the clock. You can use the toll-free number 1800 266 7780.