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Blog > Health Insurance > How Much Tax Do You Save Through Health Insurance?
Admin 3/10/2016 11:33:10 AM | 0 comments

It won’t be wrong to say that the comfortable modern city life comes with its own set of lifestyle diseases. Which exposes the urban Indian family to major financial risks associated with health issues which may lead to hospitalization and treatment. While the absence of health insurance may wipe out savings, insurance coverage can assure safe financial future for you and your dependents considering the rate at which medical costs are rising.

Tax Benefits under section 80D

Besides saving one from the trauma of healthcare expenses, health insurance (u/s 80D) can be a solid tax- saving instrument. So while medical cover gives one much-needed peace of mind, it also help save your hard earned income from going into the pool of tax.

What does Income Tax Act section 80D entail? 

  • All health plans and critical illness policies qualify to avail tax benefit.
  • Premium paid for personal accident policies does not qualify.
  • Payments made in lieu of the cost of preventive health check-up also qualifies for deductions.
  • The payments can be made for self, spouse, dependent children or parents (dependent or not).
  • Deduction is applicable on “payment basis” i.e. the year in which payment has been made rather than the year it relates to.
  • Health insurance premium paid for siblings/independent children is not eligible for tax deduction.

Points of consideration u/s 80 D

  • Health check-up: There is also a benefit of up to Rs. 5,000 on preventive health check-up within the aforesaid limit of Rs. 25,000 or Rs. 30,000 for senior citizens in a financial year.
  • Cash payment means no tax benefit: To avail the tax benefit, health insurance premium payment must be made through any banking channel (cheque, demand draft, credit and debit cards, net banking). However, payment for preventive health checkup can be made in cash.

Table below shows tax-limits applicable for FY2015-16 u/s 80D.
Possible scenarios Eligible relations & max. tax deduction limits Total deductions under section 80D
Self, spouse and dependent children Parents (dependent or not)
If every member is below 60yrs Rs.25,000/- Rs.25,000/- Rs.50,000/-
Eldest member less than 60yrs and either parent is above 60yrs Rs.25,000/- Rs.30,000/- Rs.55,000/-
Eldest member is 60yrs and either parent is above 60yrs Rs.30,000/- Rs.30,000/- Rs.60,000/-
Preventive health check-up Rs.5,000/- Rs.5,000/- Rs.10,000
                                                                                                                   
Let’s take an example taking into account the deductions mentioned in the table above-
Sanjeev (34 years) pays premium of Rs 22,000 for his family floater plan that covers his wife and two children. He also pays Rs 35,000 as a premium towards his parents’ health policy (Father 62years & mother 58 years). Additionally, he paid Rs. 3,500 and Rs. 7,000 for his wife and parent’s health check-up.

So, U/S 80D, total tax deduction in this case would be-
Health care expenses in family (INR) Cost Deductions u/s 80D allowed Deductions availed by Sanjeev
Health insurance premium paid for family floater plan 22,000 25,000 22,000
Health insurance premium paid for parents policy (more than 60yrs) 35,000 30,000 30,000
Health check-up for wife 3,500 5,000 3,500
Health check-up for parents 7,000 5,000 5,000
Total 67,500 65,000 60,500
 
So after spending Rs 67,500 on Health insurance and preventive health checkups for his family, Sanjeev gets tax deductions of Rs 60,500 as per 80D.

80DD

In the unfortunate circumstance of you having a handicapped dependent, the government provides additional deductions under section 80DD. Dependent can be spouse, parents, children and siblings. You will be required to submit a supporting medical certificate for the same.

Individuals can avail tax deductions of up to Rs.75,000 on the medical expenses incurred on the treatment of handicapped dependent with 40% disability. In case of severe disability of more than 80%, the deduction of up to Rs. 1,25,000 is allowed.

Conclusion

The fact that health insurance secures future is great, tax benefit remains the icing on cake. If our internal data is to be believed, nearly 35% of health insurance policies  are bought in the last quarter of a financial year i.e. January, February and March, the hottest period for investments and tax declarations.

If you are still looking for option to save tax, you must buy the right health plan but not before you understand the dos & don’ts of buying health insurance.

Get more info about Apollo Munich health insurance products and offerings here:

Health Insurance
Individual Health Insurance Plan
Family Health Insurance Plan
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