Health Insurance Tax Benefits under Section 80DAfter life insurance, health insurance is perhaps the most imperative plan one should have in his/her portfolio. It works in a simple manner, the insured pays regular premiums to the insurer in return of which the insurer promises to cover him financially in case of a medical contingency. But there’s more to health insurance than just reimbursing the individual for the expenses he/she incurs on his/her medical treatment. Just like life insurance, a health plan acts as a very efficient tax saving tool. It provides the insured substantial tax exemption under section 80D.

As per Section 80D of the income tax act, the premium paid towards a health insurance plan is deductible from the taxable income. The upper limit for this deductible amount is Rs 15,000 and is extendible to Rs 20,000 for senior citizens. Thus, it enables an individual to enjoy a maximum deduction of Rs 35,000 from the taxable income. In rare cases, the age of both the proposer and his parents is above 65 years. The deductible amount in such cases extends up to Rs 40,000 (Rs 20,000 + Rs 20,000)

The good news is that with effect from 2011, this deduction has been further extended to a sub limit of Rs 5,000 for the expenses incurred on preventive health check up for self, spouse or children.

 Upper Cap of Deduction When the Plan is Bought for Self, Spouse, ChildrenUpper Cap of Deduction When the Plan is Bought for ParentsTotal Deduction from the Taxable Income
Proposer’s parents haven’t still attained the age of 65 years Rs 15,000 Rs 15,000 30,000
Proposer’s parents have attained the age of 65 years Rs 15,000 Rs 20,000 35,000

 

Illustration

Mr. Tarique is a businessman aged 40 years. He buys two health plans, one for his spouse with an annual premium of Rs 12,000 and the other one for his father aged 67 years with an annual premium of Rs 18,000. Thus, the total deductible amount from his taxable income sums up to Rs 30,000 (12,000 + 18,000).

Pre-Requisites for Section 80D

Health insurance benefits under section 80D are available only to individuals and Hindu Undivided Family (HUFs). It is of not available to corporate firms. Also, the benefits can be availed only when the payment of premium is made through cheque or DD. It is not applicable when the payment is made through cash.

Section 80D has been evolved into two more sections to serve specific insurance needs.

  • Section 80DD - If an individual undertakes the financial responsibility of bearing the expenses for treatment of a dependent handicap, the tax deductible amount extends up to Rs 50,000. For severe cases, this limit is further extended to Rs 1,00,000.
  • Section 80DDB – The expenses incurred by an individual on the treatment of certain diseases (as given below) are tax deductible. The upper cap on this amount is Rs 40,000 (for those aged below 65 years) and Rs 60,000 (for those aged above 65 years). Diseases covered under section 80DDB are cancer (malignant), AIDS, neurological disorders, Parkinson’s disease, hemophilia, thalassaemia and chronic renal failure. 
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