How To Make Full Use Of Section 80D To Save Tax On Health Insurance? 

Medical emergencies can arise anytime. And, the treatment for various diseases can be expensive, and drain your savings if you don't have a health insurance plan. Apart from saving money, health insurance also helps save taxes. Read further to understand how you can make full use of health insurance income tax.

Before you know how you can claim tax deductions under a health insurance plan, you must know what a health insurance policy is. Health insurance covers the medical expenses of an insured individual, either by reimbursing the costs incurred for treatment or by directly settling the treatment cost with the hospital through the cashless procedure. 

You can choose from various types of health insurance policies depending on your family's needs. These include:

  • Individual Health Insurance 
  • Family Floater Health Insurance 
  • Critical Illness Benefit Policy 

As an earning member in your family, you must purchase health cover to safeguard the future of your family. Even the Indian government encourages everyone to buy the policy as it helps you save tax under section 80D.

 

What is Section 80D?

The Section 80D of the Income Tax Act allows you to save tax when you pay a premium for health insurance. Whether you've individual health insurance policy or a family floater policy, you can save tax up to Rs. 1 lakh under section 80D. However, tax deductions vary based on the age group you belong to. Below is the table that shows tax savings you can avail:

 

Insured

Premium Paid

Tax Deduction

 -

Self, family, children

Parents

 - 

Individual & Parents Below 60 years

25,000

25,000

50,000

Individual & Family below 60 years; Parents above 60 years

25,000

50,000

75,000

Individual, Family & parents above 60 years

50,000

50,000

1,00,000

 

HUF & Non-resident Individuals:

HUF or Hindu Undivided Family is a separate entity including two or more members. As per Section 2 (31) of the Income Tax Act, the entity has to go through a different tax assessment as they earn income from assets and businesses owned by the ancestor, who was also a member of HUF.

HUF members are also eligible for tax deductions under the health insurance policy. Whether the HUF member has an individual or a family floater policy covering spouse, children and parents, they are eligible to save taxes. 

How to make use of 80D Income Tax for a preventive health check-up?

Certain health insurance policies allow you to save when you or any member of your family undergo a preventive health check-up. But the amount of check-up is covered within the tax deductions bracket, which you may fall under depending on the policy you choose.

Let's understand this with an example:

Suppose Mr.Rao pays an annual premium of Rs 23,000 for a family floater plan that covers him, his spouse and his children. Due to some reason, Mr.Rao undergoes a preventive health check-up that costs him Rs. 5,000.

Since his family floater plan makes him eligible to save tax upto Rs 25,000. His tax deductions will now cover the annual cost of the premium of health insurance which is Rs.23,000 plus his preventive health check-up cost of Rs 2,000 only out of the total cost of Rs 5,000.

Now that you are aware of how to claim deductions under Section 80D, tax planning wouldn't be a worry. If you already have a health insurance policy, make sure you make full use to avail tax deductions under Section 80D of the Income Tax Act.