Tap to Call

Tax Benefits in Personal Health Insurance


Summary

personal health insurance tax benefits - vector picture representing tax

Personal health insurance is a type of insurance policy that provides hospitalization and other related expenses to the insured in case of treatment due to any illness or disease mentioned under the terms and conditions of the policy. The maximum amount of liability of the insurance company, in any case, would not exceed the sum insured mentioned under the policy.

The insured would pay a certain amount known as premium in return for the coverage provided by the insurance company. Health insurance policy can be taken for short term as well as long term. Short-term policies are issued for a period of 1 year whereas long-term policies are for a period of 2 and 3 years.

Health Insurance is available in Two Types:

Group health insurance and retail/ personal health insurance. Group health insurance is usually taken by the employers/ organizations for their employees whereas retail/personal health insurance is taken by the normal people. There is a provision to add the family members and other dependents in the retail or personal health insurance policy on payment of additional premium.

The personal health insurance policy can be taken on a floater sum insured or fixed sum insured basis in which the sum insured would be floating in the former whereas there would be a fixed sum insured per person in the latter. There are certain personal health insurance tax benefits of health insurance policies offered to the people under the income tax. These personal health insurance tax benefits are given in section 80D of the income tax as well as the section 80DDB deduction disease list of the income tax act.

Section 80D of Income Tax:

The major tax benefit of Health insurance is given under section 80D of the income tax act. The premiums paid for self, family, and senior citizens or parents are eligible for income tax exemption.

Here is the maximum limit of exemption available under the income tax act section 80D for premiums paid towards health insurance as well as the amount incurred on the preventive health checkup. The exemption can be claimed at the time of filing an income tax return by the insured customer. The maximum limit of exemption would be Rs.1 Lac in the case of senior citizens (Self+parents) under the income tax act section 80D.

TypeLimit of exemptionLimit for Preventive Health CheckupTotal Limit
Self + FamilyRs.25,000Rs.5,000Rs.30,000
Self & Family + ParentsRs.25,000 + Rs.25,000Rs.5,000 + Rs.5,000Rs.50,000
Self & Family + Parents (Senior Citizens)Rs.25,000 + Rs.50,000Rs.5,000 + Rs.7,000Rs.75,000
Self & Family (Senior Citizen) + Parents (Senior Citizens)Rs.50,000 + Rs.50,000Rs.7,000 + Rs.7,000Rs.1,00,000

Scenario 1: Mr. Raj Kumar, 30 years old has taken a floater health insurance policy of Rs.10 lakhs, for which he pays a premium of Rs.15,000. He had also purchased separate health insurance for his senior citizen parents of Rs.20 Lakhs sum insured, for which he has to pay a premium of Rs.50,000 per year. The total premium, in this case, is Rs.65,000 which is within the limit of Rs.75k as shown in the above table.

His parents being senior citizens and having diabetes and other illnesses would require preventive health checkups once a year for which he spends about Rs.10,000. The maximum limit which can be claimed for exemption under the income tax act section 80D for preventive health checkups for senior citizen parents is Rs.7000 even though the amount spent is more than the actual.

In total he would be eligible to claim Rs.65,000 (health insurance premium) + Rs.10,000 (preventive health checkup) = Rs.72,000 (Rs.65k +Rs.7k) (Max limit for this section is Rs.75,000). So the amount claimed for health insurance premiums and the amount spent on preventive health checkups is well within the limit under the income tax act section 80D.

Scenario 2: Mr. Razak, 62 years old has taken a floater health insurance policy of Rs.10 lakhs, for which he pays a premium of Rs.50,000. He had also purchased separate health insurance for his senior citizen parents of Rs.10 Lakhs sum insured, for which he has to pay a premium of Rs.50,000 per year. The total premium, in this case, is Rs.1,00,000 which is within the limit of Rs.1 Lakh as shown in the above table.

He and his parents being senior citizens and having diabetes and other illnesses would require preventive health checkups once a year for which he spends about Rs.20,000. The maximum limit which can be claimed for exemption under the income tax act section 80D for preventive health checkups for senior citizen parents is Rs.7000 even though the amount spent is more than the actual.

In total he would be eligible to claim Rs.1,00,000 (health insurance premium) + Rs.20,000 (spent on preventive health checkup) = Rs.1,00,000 (Max limit for this section is Rs.1,00,000). So the amount claimed for health insurance premiums and the amount spent on preventive health checkups is well within the limit under the income tax act section 80D.

Section 80DDB of Income Tax: Section 80DDB of the income tax act mentions the list of diseases which can be availed for deduction in respect of expenses incurred for medical treatment of specified diseases or ailments.

Section 80DDB provides that if an individual or a HUF has incurred any medical expenses for treatment of a specified disease or illness, then such expenses are allowed as a deduction, subject to such conditions, and capped at such amount under the income tax act section 80DDB. Under this section, the medical expenses incurred by the family such as a spouse, children, parents, etc, can be claimed under section 80DDB of the income tax act.

80DDB deduction diseases list is mentioned below:-

  1. Neurological diseases such as dementia, dystonia musculorum, chorea, motor neuron diseases, ataxia, aphasia, parkinson’s disease etc.
  2. Malignant cancer
  3. AIDS/HIV
  4. Chronic renal failure
  5. Hemophilia or Thalassemia

FAQ:

  • Under which section of Income tax is health insurance premium exempted?

The health insurance premium is exempted under the income tax act section 80D up to a maximum limit of Rs.1 Lakh for Self, family, and senior citizen parents. The income tax exemption is available for the health insurance premiums paid for self, family, and parents.

  • What is the maximum exemption amount under section 80D?

The maximum exemption available under the income tax act section 80D is Rs.1 Lakh for the health insurance premiums paid for senior citizen self and senior citizen parents in addition to the amount incurred for preventive health checkups. For more details on the limits of exemption please refer to the above table.

  • How to claim income tax exemption for the health insurance premium paid?

The income tax exemption for the health insurance premiums paid as well as the amount incurred on preventive health checkups can be claimed at the time of filing the income tax. The original bills should be kept handy at the time of filing income tax to provide all the details of health insurance premiums and preventive health checkup amounts.

  • I have spent a certain amount for a preventive health checkup, can I claim IT exemption for this?

Yes, the amount spent for preventive health checkups for self, family, and parents can be exempted under the income tax act section 80D within the specified limits as mentioned in the above table.

  • Is the premium paid for senior citizen parents exempted under income tax?

Yes. The health insurance premiums paid for senior citizens are exempted under the income tax act section 80D. The maximum limit of exemption for senior citizens is as mentioned in the above table.

  • Can my spouse and I claim the income tax exemption if I have paid the premium?

No. Only the person who paid the health insurance premiums would be eligible to claim income tax exemption under section 80D.

  • Do we need to pay income tax on reimbursement of hospitalization expenses?

No. You need not pay income tax on the reimbursement amount incurred from your health insurance policy. Since the hospital bill is borne by you, it is the amount spent on yourself and the same would not come under the earnings section of the IT act to be eligible for income tax.

  • Where can I get the best health insurance policy which can give IT exemption?

The best health insurance policy is the one that satisfies the below conditions:

  1. No room rent limit
  2. No hidden conditions and clauses
  3. High coverage at affordable premiums
  4. More number of network hospitals
  5. Less turnaround time for cashless hospitalization

For the best health insurance policy please book a call with our health insurance experts at Ethika insurance who provide an honest review of your personal health insurance policy and knowing more about personal health insurance tax benefits.

Get Quotes for Group Insurance

How many staff
do you need to cover?

Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write mostly on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Marketing Management.