Tips to Maximize Tax Savings on Health Insurance Premiums

A health insurance policy provides multiple benefits, one of which is tax savings. If you are a taxpayer, you can reduce your tax outgo by opting for eligible health insurance plans. Section 80D of the Income Tax Act of 1961 allows individuals to reduce their tax liability if they opt and pay for health-focused general insurance plans. Whether you're considering individual health insurance plans, critical illness insurance, or family health insurance, tax benefits are available across various policy types.**

What to Know About Tax Savings via Health Insurance

To make the most of health insurance tax benefits, here are some pointers:

Tax benefits should be claimed keeping in mind the age criteria**

As per Section 80D of the Income Tax Act, 1961, individuals under 60 years of age can claim tax deductions against their health insurance premiums up to a maximum of Rs 25,000. So, if you are a 35-year-old person who’s paid Rs 12,000 as the premium for your individual health insurance plan, you can claim this entire amount when listing down your tax deductions. For individuals over 60 years of age, the maximum deduction one can claim is Rs 50,000. So, if the annual premium for a 64-year-old person is Rs 35,000, such entire amount can be claimed within one financial year.

Tax benefits can be extended to family health insurance plans**

Tax benefits can also be claimed against premiums paid for health insurance plans that cover your spouse and dependent children. However, note that premiums paid to extend health insurance coverage to siblings, parents-in-law, independent children, nephews, and so on, cannot be used to claim tax deductions. The maximum deduction you can claim under health insurance for ‘self’ and ‘family’ (i.e., spouse and dependent children) is Rs 25,000, provided that you and your spouse are under 60 years of age.

Tax benefits can be availed separately for parents**

If you are paying premiums for your parents’ health insurance plan, you can claim tax deductions against that premium separately from that of yourself, your spouse, and your dependent children. The age criteria mentioned above apply to health insurance for parents too. If your parents are under 60 years of age, you can claim a separate deduction of Rs 25,000. However, if your parents are above 60 years, i.e., senior citizens, then the maximum deduction to be claimed against their policy premium goes up to Rs 50,000.

Maximum tax deductions limit under Section 80D is Rs 1 lakh**

If your parents are over 60 years of age and you (or your spouse) are also over 60 years of age, then premiums paid for plans for both parties can help to avail tax deductions of up to Rs 1 lakh. If you need to become more familiar with the above tax benefits, here are two examples to help you out. Examples: 1. Shruti, 28 years old, pays a premium of Rs 22,000 for a health insurance plan that covers herself, her spouse (29 years old), and her daughter. She has also purchased health insurance for her parents, aged 55 and 57, for which she pays a premium of Rs 45,000. Here, the maximum deduction she can claim for her family health insurance plan is Rs 22,000. In addition, she can claim a separate Rs 25,000 for her parents’ health insurance. So, her total tax deductions under Section 80D are Rs 47,000 (22,000 + 25,000). 2. Darshan, aged 40 years old, has a health insurance plan for himself and his spouse, for which he pays a premium of Rs 35,000. He has bought a health insurance plan for his father, who is 72 years old, for which the annual premium amount is Rs 48,000. Darshan cannot claim the entire amount of premium paid for himself and his spouse. Instead, the deduction is capped at Rs 25,000. For his father’s health insurance plan, he can claim all of Rs 48,000, since his father is over 60 years old. Hence, his overall tax deductions are Rs 73,000 (25,000 + 48,000).

Important Points to Keep in Mind When Claiming Tax Benefits on Health Insurance

In addition to the above section, there are a few more things you should know before claiming health insurance tax benefits.** 1. Payments for the premium must be done in a mode other than cash. Otherwise, it may not be eligible for deduction. 2. Certain other general insurance plans that are health-related, such as critical illness insurance, also allow for such tax benefits. 3. Make note of the tax regime you have chosen before you claim tax deductions to ensure you are eligible. Having an idea of the premium beforehand is paramount if you plan to buy health insurance for tax deductions. You can use a health insurance calculator for this purpose.   *Standard T&C apply. **Tax benefits are subject to change in prevalent tax laws. Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.