Health Insurance Tax Exemptions Explained
Understanding Tax Section for Medical Insurance
The Indian Government introduced exclusive tax-saving provisions under Section 80D of the Income Tax Act to encourage more people to buy a health insurance plan. Thereafter, people started viewing medical insurance policies as not only an indispensable tool for controlling healthcare expenses but also a smart way to obtain several tax advantages.
Section Defining Tax Savings Through Medical Insurance
A regular taxpayer can claim tax exemption of up to Rs. 25,000 on taxable income each financial year upon purchasing a health insurance plan. This rule is as per Section 80D of the IT Act of 1961.
Individuals can claim this benefit after purchasing medical insurance for themselves or jointly with their spouse, parents, or dependent children. The central government’s primary goal is to promote the necessity of medical insurance policies among its citizens through this noble initiative.
Note: For senior citizens, tax deductions of up to Rs. 50,000 can be claimed in a single FY.
Tax Deduction Rule as Per Section 80D
Here is a tabular representation of how tax deductions have been structured for contributions towards medical insurance plans during the period 2023-24:
| Categories of Medical Insurance Applicants | Eligibility | Maximum Deduction Allowed Under Section 80D |
|---|---|---|
| Individuals and families | Single applicant, Jointly with spouse, and with dependent children | Rs. 25,000 |
| Parents (under 60 years of age) | Additional Rs. 25,000 | |
| Senior Citizen Parents (60 years and above) | Additional Rs. 50,000 | |
| Hindu Undivided Families (HUFs) | All members including the family head, spouse, dependent parents and children | Varies as per the eligibility of the family head |
What are the Specific Deductions Eligible Under Section 80D?
As an individual medical insurance holder or a HUF policyholder, you are entitled to receive tax benefits under Section 80D for the below-mentioned payments:
- A medical insurance premium is transferred in any payment mode other than cash to secure financial protection for self, spouse, parents or dependent children.
- Amount spent on booking preventive healthcare appointments up to a maximum limit of Rs. 5,000 in a year
- Medical costs arising from the treatments of a resident senior citizen individual (aged above 60 years) who does not own other health insurance policies
- Payments toward the Central Government health scheme managed by you, your spouse and dependent children as instructed by the Government, avoiding cash mode of payment
Process to Claim Tax Deduction for Medical Insurance
To opt for tax deductions under Section 80D, you must maintain the essential payment invoices and documents for medical insurance premiums and bills incurred from preventive health check-ups.
While trying to save tax liabilities, you must upload scanned copies of the invoices and other supporting documents with your income tax return filing. If you find the procedure complicated, it is advisable to consult a tax professional to complete the procedure on your behalf.
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