Medical science is rapidly improving, but at the same time the cost of treatment in India is witnessing a meteoric rise. This inflation is increasing at double the rate of overall rate inflation, which is certainly a big reason to worry. According to the Economic Survey 2019, the component of healthcare goods has witnessed the steepest curve.
The high inflation rate makes it very hard or most Indians to be able to afford the medical care that they deserve. This is where a health insurance policy can step into the picture to cover high treatment costs.
As an added advantage, you can also claim tax exemption on the premiums paid under Section 80D of the Income Tax Act., 1961.
Definition of Section 80D
80D is a section under the Income Tax Act, 1961. It allows tax deduction on any premiums paid towards health cover you have bought for yourself and your family. An additional exemption of INR 5,000 is also allowed for health check-up expenses. Individuals and Hindu Undivided Families (HUFs) members can claim this benefit.
Example of Section 80D
Under Section 80D, an individual under the age of 60 can claim a deduction up to INR 25,000 on the premium paid towards the mediclaim for self, spouse, and children. Senior citizen policyholders can claim a deduction up to INR 50,000.
You can claim additional tax deduction up to INR 25,000 if you purchase health cover for your parents who are under the age of 60. If they are over 60, the claim can be up to INR 50,000.
Let us understand this better with an example.
Suraj is a 40-year-old individual, who has invested in health insurance plans for himself and his mother, who is aged 70. He pays INR 20,000 premium towards the policy for himself and INR 25,000 for his mother.
Since he can claim up to INR 25,000 tax deduction on his health cover and up to INR 50,000 deduction on his mother’s policy, his entire premium amount of INR 45,000 is eligible for a tax deduction under section 80D.
How to claim tax exemption under Section 80D
Below are the steps to claim health insurance tax benefits under Section 80D.
- When filing for income tax online, select 80D under the ‘Deduction’ section to claim the benefit
- You will find seven conditions under which the deduction can be claimed:
- Self and family
- Self over the age 60 and family
- Parents above the age of 60
- Self with family and parents under the age of 60
- Self with family and parents over the age of 60
- Self over the age 60 with family and parents over the age of 60.
Select the condition for which you are eligible.
- To save tax on health insurance, you will need to attach documents that prove your claim
- Submit the form
One important thing to remember is that premiums paid in cash are not eligible for tax deduction—premiums must be paid only through a cheque, debit/credit card, or net banking.
Now that you understand how Section 80D works, you may claim deductions under it if you have paid medical insurance premiums for the financial year 2019-20.