As a responsible citizen of a country, we are all familiar with the term tax. While it is very important to pay regular taxes so as to ensure that the government can provide good services as well as healthy living conditions to its citizens, which in turn will help build a strong nation, it is equally vital to have a detailed understanding of its various benefits like income tax rebates. This will go a long way in ensuring your finances are well planned.
In today’s day and age of a fast and stressful lifestyle, one cannot escape the growing uncertainty when it comes to health. Hence, it is very important to have health insurance for the entire family to cushion the financial blows of ever increasing medical expenses.
So, let us explore the various health insurance tax benefits one can avail under Section 80D of the income tax act:
Whenever a taxpayer has incurred any form of medical expenditure such as preventive health check ups, expenses incurred for medical insurance, they are eligible for income tax rebates upto Rs 60,000 under section 80D of the income tax act.
One is eligible for income tax rebate under section 80D as long as they have paid premium for medical insurance policy taken for:
- Their spouse
- Children dependent on them
- Parents, though it is not mandatory for them to be dependent.
- Health insurance deductions under section 80D are only applicable to individuals and families and not corporate firms.
- Health insurance tax benefits can only be availed when the premium for the health insurance policy has been made either by cheque or demand draft. It is not applicable on cash payments.
Types Of Deductions:
The following types of deductions can be claimed under Section 8D of income tax act:
● Health insurance premium paid for you and your immediate family.
When you have paid medical insurance premiums for yourself, spouse and your children, you can claim an income tax rebate of upto Rs 25000 as per budget 2018.
● Health insurance premium paid for your parents.
Any annual premium paid for the medical insurance of senior citizen parents is eligible for tax deductions upto Rs 50000 under Section 80D of income tax act as per budget 2018.
● Expenses incurred for preventive health check ups.
Income tax rebate of upto Rs 5000 on expenses incurred towards preventive health check ups of the insurer himself as well as his family members can be claimed under section 80D as well.
This deduction is not over and above the overall deductions of Rs 25000 and Rs 50000 (for senior citizens), but are incorporated in these deductions.
It is also very important to note that this deduction of Rs 5000 is not on per person basis. It is the upper limit of deductions allowed on the preventive health check up expenses of the entire family.
● Medical expenses of super senior citizens.
Citizens above the age of 80 years come under the bracket of super senior citizens.Since there are very few insurance providers who provide health coverage to this age group, they were not able to get medical insurance and hence avail income tax rebate under Section 80D.
So, since the Finance Act 2015 was introduced under section 80D of income tax act these citizens have been able to avail the income tax rebates on any medical expenses incurred by them, irrespective of whether they have a health insurance policy or no.
For super senior citizens, the medical expenses eligible for income tax rebate of upto Rs 50000 include annual premiums paid for health insurance policy, preventive health check ups as well as any other medical expenses incurred for health purpose.
● Section 80DD
In the event of an individual taking financial responsibility for the treatment of a dependent handicap, the income tax rebate amount goes up to Rs 50000 and this amount is further extended to Rs 100000 for severe cases of disability.
● Section 80DDB
for expenditure incurred by an individual for the treatment of certain critical illnesses like cancer, AIDS, parkinson’s disease, thalassaemia, hemophilia, chronic renal failure and neurological disorders, the upper cap of income tax deductions is raised to Rs 40000 (for those below 65 years of age) and Rs 60000 (for those above 65 years of age).
Illustrative Case Study
Suppose an individual assessee pays the below medical insurance premium during the financial year 2018 – 2019:
- Rs 24000 as the annual health insurance premium for himself.
- Rs 29000 as the annual health insurance premium for his parents.
In the above mentioned case, if neither of his parents is a senior citizen, this assessee can claim an income tax rebate of Rs 49000 ( Rs 24000 + Rs 25000) as per the upper limits.
However, if either of his parents happen to be a senior citizen, he can claim health insurance tax benefits of Rs 53000 ( Rs 24000 + Rs 29000) since the upper limit for senior citizens is Rs 50000.
Further to this, if, for instance, his father, who is a senior citizen, happens to pay Rs 12000 out of the total Rs 29000 spent on his parent’s health insurance:
- The assessee can only claim income tax deductions of Rs 17000 which was borne by him under section 80D.
- His father will be eligible for an income tax rebate of Rs 12000 from his taxable income.