Health Insurance Tax Benefits: What You Need to Know
Mini Balakrishnan
When you give priority to your health and opt for an Insurance Plan that protects your financial issues without you having to spend too much on Health care expenses, you are almost relaxed.
But for the health insurance plans the premium amount paid is subject to tax deduction under Section 80D of the Indian Income Tax Act. which means the premium amount you pay for your health insurance policy can be reduced from your taxable income with certain limits. Almost all health insurance plans give you tax benefits on the premium amount you pay.
This tax benefit is certainly very useful as you don’t have to worry too much about income tax deduction again. along with it your health also gets protected without many expenses. Let’s look at the details of how tax benefits apply to each plan and each type of health insurance.
Tax Benefits For Insurance Policies
Let’s explore the tax benefits associated with different types of insurance policies. In this section, we cover:
- Health insurance tax benefits
- Term Insurance Tax Benefit
- Medical Insurance Tax Benefit
Let’s look at the tax benefits for each type of scenario:
| Type Of Cover | Tax Benefit Limits |
| For Individual and Family including Spouse and Dependent Children | The tax benefits for this type of cover is that you can claim up to an amount of Rs.25,000 in a financial year. The amount can be beneficial for you, your spouse and your dependent children. If you or your spouse is a senior citizen then the deduction limit will go up to Rs.50,000. |
| For Parents | The tax deduction is allowed for parents or legal guardians and the amount deductible is up to Rs.25,000 in a financial year. Again if your parent is a senior citizen, the maximum limit rises to Rs.50,000 per financial year. |
| For a dependent with a disability | This tax benefit comes under Section 80DD of the Income Tax Act. If your dependent included in your health insurance policy is disabled, the tax benefits can be claimed up to Rs.75,000. This amount is always based on the expenses incurred for any medical treatments for the disabled person, rehabilitation, nursing, etc. If there is a case of extreme disability then you may claim up to Rs.1.25 Lakhs. The dependents may be anyone from spouse, children, parents or even siblings. You might have to present all the medical records and certificates during the time of a claim for the tax benefits. |
| For treatment of a specific illness | The tax benefits for this come under Section 80DDB in the Income Tax Act. If you are being treated for a specific illness, you are eligible to claim a deduction of Rs.40,000 for the medical expenses of the treatment. If it’s for a senior citizen then the benefit rises to Rs.1 Lakh. The deduction can be claimed for yourself, your spouse, parents or legal guardians and dependent children and siblings too. The medical treatments are according to the treatments mentioned for specific diseases under Rule 11DD of the Income Tax Act. |
We mentioned several tax benefits in specific circumstances. There are no tax benefits available for Group Health Insurance premiums, which are paid by your employer.
What Are The Term Insurance Tax Benefits?
People subjected to tax-paying can avail of various types of Insurance plans to use the amounts for better purposes by availing benefits on premiums paid for the same. Term insurance is an insurance plan for a specific term and it gives you a large sum assured of a very low premium rate.
When term insurance provides financial support to your loved ones under any unfortunate circumstance, the tax benefits are also very much active on the premiums paid. The sum received as a death benefit of the policyholder to his nominees will be fully excluded from tax under Section 10(10D) of the Income Tax Act.
But normal term insurance will pay the death benefit during the policy term and there will be a return of premium paid after the policy maturity in the case of the actual policy holder’s presence during the policy tenure. This premium refund is understood as tax-free under section 10(10D).
| Term Insurance Tax Benefits under Section 80C | This includes the premium paid for the term life insurance and are eligible for a tax deduction up to Rs.1.5 Lakhs under specific terms and conditions. However, if the policy is voluntarily surrendered or terminated the tax benefits won’t be applicable. |
| Term Insurance Tax benefits under Section 80D | For insured policies for a health-related add-on cover such as critical illness, surgical care etc. the deduction amount is up to Rs.25,000. If you have taken the policy for your parents then an additional Rs.25,000 benefit is applicable and if they are senior citizens then the amount goes up to Rs.50,000 |
| Term insurance tax benefit under Section 10(10D) | This is applicable when the policyholder gets deceased. In this case, the policy will be free from tax. This is referred to as Insurance Tax Relief. |
What Are The Medical Insurance Tax Benefits?
We know why we take medical insurance policies as it is a very uncertain requirement that we cannot even predict. So it’s always better if you have medical insurance in place than to feel sorry for getting into financial stress under such emergencies. What we see in India is that a majority of the people don’t yet have insurance for medical emergencies.
The Government of India always encourages people to buy medical insurance as it also gets tax benefits under Section 80D which keeps your worries about premium payments at bay. The tax benefits are available for top-up medical plans as well as critical illness policies. The benefits apply to you, your spouse and your dependent children or parents.
Deduction under Section 80D
The maximum allowed deduction under Section 80D of the Income Tax Act is Rs.25,000 in a financial year. If your parents have medical insurance and they are senior citizens then the deduction limit is Rs.50,000. In case both you and your spouse and also your parents are senior citizens and all of you have medical insurance in place then the maximum deduction under this section is Rs.1 Lakh. If you have a full medical cover which includes your parents who are above 60, your dependent children and you and your spouse then the tax benefits can be claimed up to Rs.75,000.
Top 10 Insurance Savings Plans In India And Their Benefits
There are investment plans in Insurance policies for people to save their money in a systematic way so that they can get benefits on their long-term financial commitments in life. The insurance savings plan offers so many features to meet an individual’s specific needs. The policyholder also gets benefits on their insurance cover by opting for a savings plan.
For example, under a savings plan, the death benefit is directly paid to the nominee of the policy in case of the unfortunate death of the insured. One major attraction of savings plans is that they are supported by the Government of India or other public sector banks. This way the people who opt for a savings plan get complete security and safety in their finances.
Let’s look at the top 10 Savings Plans in India and their Sum Assured benefits along with Tax Benefits:
| Policy Name | Sum Assured | Tax Benefits |
| Bajaj Allianz Guaranteed Assure | Rs. 1 Lakh/ No Limit | Every Claim received and premiums paid are eligible for benefits Under 80C and 10(10D) of the Income Tax Act |
| Bharti AXA Life Secure Savings Plan | Depends on the chosen premium amount | Benefits applicable to the premium paid as per Section 80C on every claim received and Section 10(10D) of the Income Tax Act |
| Birla Sun Life Insurance Bachat Endowment Plan | Rs. 1 Lakh/ No LimitSum Assured on death is higher than the basic SA or 10 times the yearly premium subject to a minimum of 105% of all premiums paid till the demise of the insured. | Benefits applicable to the premium paid as per Section 80C on every claim received and Section 10(10D) of the Income Tax Act |
| Canara HSBC Smart Vriddhi Plan | 100 times the monthly Income. | Premium paid benefits will be applicable under Section 80C and any claims will get benefit Under Section 10(10D) under Income Tax Act. |
| Future Generali Pearls Guarantee | Based on Age and Policy Term | Tax benefits are applicable on the premium paid and also the Death and Maturity benefits under Section 80C and Section 10(10D) of the Income Tax Act respectively |
| HDFC Life Pension Super Plus Plan | Depends on the type of cover opted that is based on the benefits offered by the insurance company. | Income tax benefits include Section 80CCC on the premium paid and on the commuted part as per Section 10(10A) of the Income Tax Act. The Death benefit under Section 10(10D) is excluded. |
| ICICI Pru Subh retirement Plan | Depends on the type of cover opted for as per company terms. | Premium paid is exempted from tax under Section 80C of the Income-tax Act and one-third of the maturity benefits are exempted under Income Tax Section 10(10A). An Annuity is taxable. |
| India First Simple Benefit Plan | Rs. 2 Lakhs – Rs. 5 Lakhs | Benefits are available as per Section 80C and 10(10D) of the Income Tax Act. |
| SBI Life Smart Wealth Builder Plan | Depends on the age and type of premium paid as per company terms. | Benefits are available as per Section 80C and 10(10D) for claims under the Income Tax Act. |
| TATA AIA Fortune Guarantee Plan | The basic amount is upto 10 times the yearly premium. | Tax benefits include Section 80C. |
For the people who are subject to tax payments according to their income, the Government of India offers tax benefits by reducing the premium amount under Section 80D of the Indian Income Tax. The tax benefits are allowed on premiums paid for critical illness too. To save on tax, a variety of deductions are available under various sections of the Income Tax Act.
Tax Benefits are subject to change from time to time and it’s highly recommended to speak to tax consultants before you make any investments under any Insurance Plans.
