Tax Benefits on Health and Medical Insurance in India: A Comprehensive Guide

Health and medical insurance have turned out to be the essential parts of financial planning in India. Since the health care costs are increasing, insurance is a lifesaver for many people, and it is a vital aid in case of the financial crisis. Moreover, the Indian government has introduced tax incentives to motivate people to invest in health insurance plans.

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This blog explores the health insurance tax benefits that are mentioned in the different sections of the Income Tax Act which you can use to make wise decisions and increase your savings.

Section 80D: Deduction for Health Insurance Premiums

Section 80D of the Income Tax Act grants deductions for premiums paid for health insurance plans. Here’s a detailed look at the provisions:

1.     Self, Spouse, and Dependent Children

• You can claim a deduction of up to Rs 25,000 per financial year for the premiums paid for yourself, your spouse, and dependent children.
• If you or your spouse is a senior citizen (aged 60 years or above), the deduction limit increases to Rs 50,000.

2.     Parents

• For premiums paid towards the health insurance of your parents, you can claim an additional deduction of Rs 25,000.
• If your parents are senior citizens, the deduction limit goes up to Rs 50,000.

3.     Preventive Health Check-ups

• A maximum of Rs 5,000 can be claimed for preventive health check-ups within the overall limit of Rs 25,000/Rs 50,000 for self, spouse, and dependent children and a separate Rs 25,000/Rs 50,000 for parents.

Section 80DD: Deduction for Medical Treatment of Dependent Disabled

Section 80DD gives the deductions for the medical treatment, training, and rehabilitation of a dependent who is disabled. The key points are:

1. Eligibility:

• The deduction is given to resident individuals and HUFs.
• The dependent must be a spouse, children, parents, brothers, or sisters of the individual or any member of the HUF.

2. Deduction Limits:

• A flat deduction of Rs 75,000 is available even if the actual expenses incurred for the medical treatment of a dependent with a disability are higher or lower.
• For severe disabilities (80% or more), the deduction is Rs 1,25,000.

3. Conditions:

• The taxpayer has to bear the cost of the medical treatment, nursing, training and rehabilitation of the disabled dependent.
• Besides, the taxpayer can pay or deposit under schemes framed by LIC or any other insurer for the maintenance of the disabled dependent.

Section 80DDB: Deduction for Specified Diseases

Section 80DDB allows for deductions on the expenses incurred for the treatment of specified diseases for oneself or dependents. Here’s what you need to know:

1. Eligibility:
   • The deduction is available to resident individuals and HUFs
2. Deduction Limits:
   • For individuals below 60 years, the maximum deduction is Rs 40,000.
   • For senior citizens (60 years and above) and super senior citizens (80 years and above), the limit is Rs 1,00,000
3. Specified Diseases:
   • The diseases covered include neurological diseases (dementia, dystonia, motor neuron disease, ataxia, chorea, hemiballismus, and aphasia), malignant cancers, chronic renal failure, haematological disorders (haemophilia, thalassemia), and others as specified by the government.
4. Conditions:
   • The taxpayer must obtain a certificate in the prescribed format from a specialist doctor working in a government hospital.

Section 80U: Deduction for Disabled Individuals

Section 80U provides deductions for individuals with disabilities. Here are the details:

1. Eligibility:
   • The deduction is available to resident individuals who have been certified by medical authorities to have a disability.
2. Deduction Limits:
   • A flat deduction of Rs 75,000 is available for individuals with a disability (40% or more).
   • For severe disabilities (80% or more), the deduction is Rs 1,25,000.
3. Conditions:
   • The individual must furnish a certificate of disability from a recognized medical authority.

Additional Benefits and Considerations

Here is information of some additional benefits and features that you must consider to understand health insurance tax benefits in a better way.

1. Medical Insurance for NRI

NRIs can also enjoy tax advantages under Section 80D for health insurance premiums paid in India, with the same limits and conditions as resident Indians.

2. No Tax Benefit for Cash Payment

Payments for the health insurance premiums in cash are not applicable to be deducted under Section 80D, except for the payments made for the preventive health check-ups.

3. Group Health Insurance

If you are under the group health insurance policy of your employer, the premium paid by the employer is not part of your taxable income.

4. GST Input Credit

Businesses can avail GST input credit on health insurance premiums for employees if it is mandated by law (e.g., for workers in hazardous industries).

The Bottom Line

Through the use of deductions under different sections of the Income Tax Act, you can lower your taxable income and the amount of tax you pay. And at the same time, you can also make sure that you have enough health coverage for you and your family.

Purchasing health insurance plans not only guarantees your health but also provides you with the tax benefits, which, in turn, makes it a brilliant decision for a financially stable future.

To resolve your queries about different health insurance policies, feel free to contact ACKO.

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