Health insurance Policy - Save Tax Upto ₹75000‎ u/s 80D

Save Tax with Health Insurance for FY Year 2019-20

Do you want to save income tax by investing in health insurance plans? Definitely you will. Health Insurance policy helps you save tax along with taking care of your medical expenses. The premium you pay for your health insurance plan is tax exemption under Section 80D of the Income Tax Act. Below are some of the key benefits under section 80D for FY 2019-20 & AY 2020-21.

1. The section allows you to claim deduction of up to Rs. 25,000 per financial year for medical insurance premium.
2. The premium can be for you, your spouse, and dependent children.
3. If you or your spouse is a senior citizen (60 years or above), the limit goes up to Rs. 50,000.

Also, it’s worth keeping in mind that the premium you pay towards the health insurance plan for you and your family (including parents) can be claimed as a tax deduction from your taxable income. However, the maximum deduction you can claim is determined by your age. So, we can say that health insurance is the best investment option in today’s market you can opt for the following benefits:

• Tax benefits
• Cashless hospitalization
• Global coverage
• Maternity and newborn cover
• Ayush treatment coverage
• Cover for domiciliary treatment
• Daycare coverage, and more.

So, start investing in health insurance policies and reduce your income tax liability as well as look for a healthy lifestyle.

Tax Saving Options with Health Insurance

Whether you are a salaried person, or self-employed, you are eligible for tax benefits under the Income Tax Act. For this, you need to purchase a health insurance policy, as purchasing health insurance is an optimal tax saving tool not just for salaried, but also for self-employed people. So, what are you waiting for? With the tax saving option, the health insurance plan you purchase for your health is not just healthier for your life, but also beneficial for your pocket! Buy health insurance today and save tax during the financial year 2019-20. Let’s dig deeper and get insights into different sections of the Income Tax Act under which you can save tax.

Save Tax Under Section 80D

Section 80D of the Income Tax Act allows every resident (non-resident Indian with some conditions) to save tax for their medical insurance policy. Not just choosing a health insurance policy for yourself can allow tax saving, but you can also enjoy tax saving by purchasing a health plan to insure your family members, including your spouse, dependent parent and children. Moreover, section 80D enables individuals to get a deduction for preventive medical checkups. It means you can claim for the expenses incurred on preventive healthcare (alternately preventive medicine), which involves the measures taken for preventing a disease, as opposed to treating a disease. The best part is that the tax benefit under section 80D is above the deduction claimed under Section 80C/CCC/CCD.

Deduction on Preventive Medical Checkups

As said earlier, there is a provision for saving tax by preventing health checkups on an annual basis. With this feature, you can claim the maximum amount of Rs. 5,000. Out of the limit of Rs. 25,000, (Rs. 50,000 for senior citizens w.e.f. April 1, 2018) for medical insurance, you can claim up to Rs. 5,000 for the costs of preventive health checkups for each budgetary year under Section 80D income tax.

Tax Saving with the Health Insurance Premiums Paid for Parents/Guardians under section 80D

The section 80D of the Income Tax Act also allows you to save tax against the health insurance premium paid for parents or guardians. Below are the details:

1. You can get a deduction of up to Rs. 25,000 every financial year against the premium paid for guardians.
2. If your parents or parent comes under the senior citizen category, then the maximum limit goes up to Rs. 50,000 a year.
3. This limit additionally includes Rs. 5,000 towards annual health checkups of your parents.

No Tax Benefit is Available on Cash Payment

Yes, it’s important to note that no tax benefit is offered if the health insurance premium is paid in cash. Keep in mind:

1. The premium should be made online via net banking, a draft, cheque, debit or credit cards.
2. However, installments for a preventive health checkup can be paid in cash.

Let us share an example: Arvind lives in a family of six members.

• He is 36 years old
• His spouse is 34 years old
• He has 2 children - 11 and 7 years old
• His father is 64 years old
• And mother is 60 years old

Arvind has bought a family floater plan to cover himself, his spouse and two children. For the plan, he has paid an annual premium of Rs. 20,000. Besides, Arvind has bought medical insurance for his parents for the premium of Rs. 25,000 and paid Rs. 10,000 for his health checkup. Not only this, he has also paid Rs. 8,000 for his parents’ health checkup. It means Arvind spent a total amount of Rs.63,000. How much can Arvind save on tax?

• Case 1: Arvind has spent a total of Rs. 20,000 on health insurance premiums for self, spouse and children. The maximum allowable deduction is Rs. 25,000. So, he can save the total amount of Rs. 20,000 against the premium paid for self, spouse and children.

• Case 2: Arvind has spent Rs. 10,000 as a preventive health checkup. Maximum allowable discount is Rs. 5,000. So, he can save Rs. 10000-Rs. 5000 = Rs. 5,000. So, Arvind ’s total expense is 30,000 and the maximum allowable discount is Rs. 25,000. That’s why, Arvind can save a total amount of Rs. 20,000+Rs.5,000 = Rs.25,000. Similarly,
• Case 3: The premiums paid for senior parents is Rs. 25,000. The maximum allowable deduction is Rs. 50,000, which has been increased in Budget 2018 from Rs 30,000. So, the deductible amount is Rs. 25,000.
• Case 4: Actual expenses for a preventive checkup for parents is Rs. 8,000. The allowable deduction is Rs. 5,000. So, the applicable deduction is Rs. 5,000. Therefore, total expenses for senior parents are Rs. 33,000. The maximum deduction can be Rs. 50,000. So, Arvind can save Rs. 25,000+5,000 = 30,000. That’s why total savings Arvind can make are: 25,000+30,000 = 55,000 Thus, out of the total expense of Rs. 63,000, Arvind can save Rs. 55,000 as tax benefits. In another example, Arvind is 65 years old. He has paid a health insurance premium of Rs. 45,000 during the financial year for his dependents and himself. He has also paid a health insurance premium of Rs. 55,000 for his father who is 80 years of age. Arvind can reap the following benefits under section 80D of the Income Tax Act:

• Tax benefits of Rs. 45,000 against the premium of Rs. 45,000 paid against his dependents and self.
• Tax benefits of Rs.50,000 against the premiums (Rs. 55,000) paid for senior parent.

All in all, Arvind can avail a tax deduction of Rs. 95,000. In case, both Arvind and his parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh.

Understand Applicability and Deductibility for Tax Saving Under 80D

Emergencies always take us by surprise. So, it is advisable to be safe than feel sorry. And there is no difference when we talk about medical insurance. A must in your Tax Planning and Investment Portfolio, health insurance should be bought by every individual to avail tax deductions under Section 80D. Find below various scenarios to make the right investment for tax saving during the financial year.

1. If you and your parents are below 60 of their age, then up to Rs. 25,000 can be claimed against the premium paid for self, family and children. In addition, an additional Rs. 25,000 can be claimed against the premium paid for parents. It means, you can deduct a total amount of Rs. 50,000 under Section 80D.
2. In case you and your family are below 60, but your parents are above 60, you can save a amount of up to Rs. 25,000 against the premium paid for self, family and children. In addition, you can claim an additional Rs. 50,000 for the premium paid for parents. So, you can save a total amount of Rs. 75,000.
3. If you, your family and parents are above 60 years, up to Rs. 50,000 can be saved against the the premium paid for yourself, family and children. Besides, up to Rs. 50,000 can be claimed for the premium paid for parents. It means, a total deduction of Rs. 1,00,000 can be made under Section 80D.
4. In the case of members of HUF, the premium paid for self, family, and children for up to Rs. 25,000 and premium paid for parents for up to Rs. 25,000 can be claimed. Which means, a total deduction of Rs. 25,000 can be made under Section 80D. This is because the parents will be added for tax benefits only if they are senior citizens.
5. In a non-resident individual scenario, up to Rs. 25,000 can be claimed for paying the premium for self, family, and children. If the premium is paid for parents (not senior citizens), you can’t save tax against the premium paid for parents. This is because parents will be added for tax benefits only if they are senior citizens. It means, you can deduct a total amount of Rs. 25,000 under Section 80D.

Tax Exemption under section 80D on Premium For Senior Citizens

There are other provisions of tax saving under section 80D when it comes to senior citizens. Precisely, senior citizens are the people (men or women) who are 60 years old or more but below 80 years. The people in this age range are also eligible for income tax savings. Get the details below:

1. People of this age can claim a deduction of up to Rs. 50,000 on their medical insurance premium during every fiscal year.
2. They can get Rs.1 lakh for medical treatment of certain critical illnesses respectively.
3. If your super-aged father has no insurance and your mother is a senior citizen, then you can claim a tax deduction of Rs. 50,000 towards medical treatment, medical coverage and registration of your guardians.

Conditions Applied in Section 80D

While Section 80D comes with a lot of benefits, there are certain conditions that need to be mentioned here. These conditions are related to third-party payment, cash payment, service tax, exclusion of tax benefits under group health insurance and much more. Here are the details:

• No third party should pay health insurance premiums to avail tax benefits under this section.
• No eligibility for tax benefits if health insurance premiums are paid in cash.
• Cash payment for preventive health care check-ups is considered for tax benefits.
• No tax benefit can be availed on the Service Tax levied on the premium payment.
• Service tax is chargeable on the health insurance premium payments.
• The amount of service tax on the health insurance premium is about 14%.
• No tax benefit is available on group health insurance.
• One can get tax benefit if he/she pays extra premiums to enhance the coverage

Save Tax Under Section 80DDB, 80DD, 80U, 17 and 80D and 80C Options

Now, it’s clear that buying health insurance for your family, dependent children, and parents can let you save tax under section 80D. Besides this section, there are several other sections like 80DDB, 80DD, 80U, 17, 80C, etc. under which you can save tax. The section 80DDB allows you to save tax for the expenditure done for treatment of illness specified. Similarly, section 80DD and section 80U deal with the tax-saving deduction that can be claimed for the medical expenditure incurred. Under these sections, an individual for himself/herself or for a dependent person can claim the deduction. Let’s get in-depth information about these sections.

Tax Saving Under Section 80DDB Scheme

Besides safeguarding you against life-threatening/critical diseases, your health insurance policy also lets you earn tax deduction under 80DDB. This section allows tax saving for medical treatment of a dependent who is suffering from specified diseases such as chronic renal failure, cancer, Parkinson infection, cardiac disease, etc. The amount of deduction that is claimed depends on the age of the person on whom the expenditure has been incurred. The deduction under section 80DDB can be claimed for self or a dependent. The section allows an income tax deduction of up to Rs. 1, 60,000 for the medical treatment.

• Rs. 60,000 for senior citizens
• And Rs. 1,00,000 for extremely senior citizens

The amount allowed as a deduction for FY 2018-19 onwards (Assessment Year 2019-20) is Rs 1,00,000 for extremely senior people. Earlier in the FY 2015-16, the deduction amount was Rs 80,000. However, it has been increased from Rs 80,000 to Rs 1,00,000 for FY 2018-19. You can avail of this deduction for the medical expenses incurred for specified ailments for the following person:

• Self
• Spouse
• Dependent parents
• Or dependent children and siblings

It’s important to note that if the dependant is insured and some payment is also received from an insurance company or reimbursed from an employer, such insurance or reimbursement received is subtracted from the deduction. Also, keep in mind that while filing income tax return, it is important to attach a certificate issued by the treating doctor.

Save Tax Under Section 80DD Scheme

Under section 80DD of the income tax, you can claim the expenses incurred for treatment of a dependent with disability. The deduction under the section can be claimed or the expenses incurred on the medical treatment (including nursing), training and rehabilitation of a person with disability. You can claim this deduction from your total income before levy of tax. Thus, you can reduce the total tax payable. You can also claim the amount that you have paid for or deposited money under any scheme such as LIC, or other insurer or a specified company for the maintenance of the disabled dependent. Under section 80DD, you are authorized to avail the benefit of up to Rs. 75,000 based on the expense incurred for:

• Nursing
• Training
• Medical treatment
• Preservation
• Rehabilitation of a dependent with disability

You can claim Rs. 1.25 lakh for an extreme and serious disability of dependents. The dependents may be your parents, spouse, children, or siblings. To enjoy this benefit, you need to have a supporting medical certificate.

Conditions Applied to Save Tax Under 80DD

Like conditions in section 80D, there are some conditions under 80DD also. You need to be aware of these conditions:

• The deduction under the section is available only for a dependent. Taxpayers can’t reap this benefit.
• If the dependent has claimed a deduction under section 80U for himself/herself, the taxpayer can’t get the deduction.
• Disability of the dependant should not be less than 40%.

When you meet the above conditions, you can get the deduction amount –

• As per the financial year 2015-16, Rs. 75,000 is allowed in case the disability is more than 40% and less than 80%.
• According to the financial year 2015-16, Rs 1,25,000 is allowed in case the disability is more than 80%).

Tax Saving Investment Under Section 80U

Section 80U is another section of the income tax which allows tax saving benefits for the people if either they or any member in their family are suffering from certain disabilities. It means the deduction is available if the individual himself/herself is suffering from the disability. The disability of the person can include:

• Blindness & low vision
• Mental retardation
• Mental illness & leprosy-cured
• Hearing impairment
• Locomotor disability

A person who is disabled (at least 40 percent disability certified by the medical authorities) can avail the benefits of Rs. 75,000 under this section. The limit can increase up to Rs 1,25,000. The limit of deduction can increase in case of severe disability, which includes multiple disabilities, autism and cerebral palsy. Note: According to FY 2015-16 – Section 80U deduction limit of Rs 50,000 has been increased to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

Key Difference between Section 80U and Section 80DD

Both sections 80DD and 80U sound similar. But, they are different. While section 80U offers tax benefits if the individual taxpayer suffers a disability, the section 80DD provides tax benefits in case a dependent family member(s) of the individual taxpayer suffers from a disability.

Save Tax on Medical Allowance Under Section 17

As per section 17, medical expenditure paid from your salary by your employer as medical allowance for you or your family (spouse, children, siblings, dependent parents) can be deducted from your taxable income. The maximum amount that can be deducted under this section is up to Rs. 15,000 per fiscal year. The amount paid from your salary by your employer for treating an ailment of your family is excluded. This saving can be up to Rs. 15,000 per fiscal year. Family members can include self, spouse, children, siblings and dependent parents).

Save Tax Under Section 80C Option

You might be aware of section 80C. This section of the Income Tax Act lets taxpayers make several investment options, which not just give returns. But, taxpayers can also claim the investment amount as deduction when it comes to calculating total taxable income. The maximum amount of deduction you can claim under section 80C is Rs 1.5 lakh for the financial year FY 2018-19. Deduction under the section is not only for the investment purpose, but also for specific expenditures such as payment of tuition fee for your children, Contributions to National Pension System, and so on. For tax saving under section 80C, you should invest in the following schemes as the premium paid for them is eligible for tax exemption. These schemes are:

• Life Insurance Policies (LIC)
• Public Provident Fund (PPF)
• Equity-Linked Savings Schemes (ELSS)
• Employees' Provident Fund (EPF)
• National Savings Certificate (NSC)
• Five-year Bank Fixed Deposits (FDs)

Difference Between Section 80C and 80D Options

People often get confused between Section 80C and 80D when it comes to income tax saving. You should not get confused. Below is the basic difference between them: Section 80C: Under section 80C, you can enjoy a deduction of up to Rs. 1.5 Lakh. It lets you avail many different types of tax savings expenses and investments Section 80D: Under section 80D, the deduction limit is up to Rs. 65,000. It allows you to save tax for health premiums of self, family and parents. It also lets you get tax benefits for expenses incurred in preventive health checkups. Our sedentary lifestyle has increased the chances of contracting different types of lifestyle diseases. In addition, the medical inflation is increasing on compound rates. Both, these cases have made it imperative to secure your and your family's health. Along with going for a healthy lifestyle, choosing an adequate health insurance plan is a wise step because it can protect you and your family health. Health insurance provides an umbrella cover for financial needs when a medical emergency strikes. If you’re not submitting any proof for tax saving this financial year, buy a comprehensive health insurance policy for your family and enjoy tax saving under section 80D. Hope, you have understood all the sections of Income Tax Act to avail tax benefits. Let us know whether or not you are able to save tax. InsuranceDekho offers health insurance of all top insurers in India without any commission, be it Religare, HDFC Ergo, ICICI Lombard, ManipalCigna, Star Health Insurance, Max Bupa, and so on.