You are aware of the health benefits of health insurance. But, are you aware of the tax benefits of health insurance? Do you know that you can claim tax benefit for payment for preventive health checkup too?
Are you aware there are exemptions/deductions available for medical expenses incurred under specific cases?
In one of the earlier posts on how to save income tax, I had focused on popular Section 80C investments. In this post, I shall focus on tax benefits of health insurance and other tax relaxations available for specific medical expenses incurred.
1. Premium paid for Health Insurance and preventive health checkup (Section 80D)
You can claim deduction up to Rs 25,000 for health insurance premium paid (for self, spouse and dependent children) during the financial year.
If either you or your spouse is a senior citizen (>= 60 years), the deduction limit goes up to Rs 50,000 (from FY019) per financial year. Till FY2018, the limit for senior citizens was Rs 30,000 per financial year.
You can also claim deduction up to Rs 5,000 for preventive health checkup for self, spouse and children.
However, the total tax benefit for health insurance premium and health checkup is limited to
Rs 25,000 (or Rs 30,000) Rs 25,000 or Rs 50,000, as the case may be.
2. Premium paid for Health Insurance and health checkup of Parents (Section 80D)
If you pay health insurance premium for your parents, you can take an additional benefit of Rs 25,000 per financial year. If either parent is a senior citizen, the limit goes up to Rs 50,000 per annum. This rule is applicable from FY2019.
Old rule (Applicable till FY2018): Health insurance premium paid for your parents is also eligible for deduction up to Rs 25,000 per financial year. If either parent is a senior citizen, the limit goes up to Rs 30,000.
The deduction limit includes any payment (up to Rs 5,000) made for preventive health checkup of your parents.
Points to note:
- The payment for health insurance premium cannot be made in cash.
- The payment has to through a banking channel (cheque, demand draft, credit card, debit card, net banking etc).
- The payment for preventive health checkup can be made in cash.
- Health insurance premium paid for siblings is not eligible for deduction.
- If you are paying the premium for a multi-year policy, then you can proportionate deduction in the respective years. (Introduced in Budget 2018. Applicable from FY2019). Explained through an example later in the post.
- Even premium paid for Critical Illness Health Insurance plans and Top-up and Super top-up insurance plans is eligible for deduction under Section 80D.
Illustration (from FY2019)
If you are 35 and your parents are senior citizens, you can claim the maximum benefit of
Rs 55,000 Rs 75,000 for health insurance premium and preventive health checkups for self, spouse, children and parents. Rs 25,000 Rs 25,000 towards health insurance premium and checkup for self, spouse and children. And Rs 30,000 Rs 50,000 towards health insurance premium and checkup for parents.
Here is another example:
For tax benefits for a multi-year policy, let’s try to understand with the help of an example.
Let’s assume you purchase a 2 -year health insurance policy in April 2018 and pay a premium of Rs 36,000.
This policy will be in force until April 2020. This means that the policy will be in force for 3 financial years (FY2019, FY2020 and FY2021).
In this case, you can claim tax benefit of Rs 12,000 (Rs 36,000/3) in each of the relevant financial years ((FY2019, FY2020 and FY2021). Therefore, even though, you have made the payment for a 2-year policy, the tax benefit has to be split over 3 years.
Of course, when you renew in policy in April 2020, you will get the tax benefit for the premium payment in FY2020 and the subsequent years.
3. Medical Expenses for Uninsured Senior Citizens (>= 60 years) (Section 80D)
If you are a senior citizen (>= 60 years) and have not purchased any health insurance, you can avail deduction for medical expenditure incurred up to Rs 50,000 per financial year. This rule is applicable from FY2019.
However, please note the total deduction that can be availed for health insurance, preventive checkup and medical expenses shall not exceed Rs 50,000 (from FY2019).
Note the deduction for such medical expenses can be availed only in case the concerned senior citizen is uninsured (no amount has been paid to keep in force a health insurance plan).
Additional, you can also avail this benefit for payment towards medical expenditure of your parents provided they are senior citizens and have not purchased any health insurance.
Old rule (applicable till FY2018): If you are a very senior citizen (>= 80 years) and have not purchased any health insurance, you can avail deduction for medical expenditure incurred up to Rs 30,000 per financial year. As you can see, till FY2018, the benefit was only for very senior citizens (>=80 years). From FY2019, the benefit has been extended to all senior citizens (>=60 years).
You are a
very senior citizen but your wife is not. You don’t purchase health insurance for yourself but purchase one for your wife.
The deduction for your medical expenses, health insurance of your spouse (or children) and health checkup is limited to
Rs 30,000 Rs 50,000.
If either of your parents is a
very senior citizen and uninsured, you can avail deduction for medical expenses incurred up to Rs 30,000 Rs 50,000 per financial year.
Please understand medical expenses are eligible for deduction only for the parent who is a
very senior citizen. As mentioned above, the total deduction for premium payment, health checkup and medical expenses is limited to Rs 30,000 Rs 50,000 per financial year.
4. Treatment cost for specified illness (Section 80DDB)
You can claim a deduction to the extent of Rs 40,000 for medical expenses incurred for specified ailments for self and dependent relatives. You can claim for spouse, parents, children and siblings.
The deduction limit increases to
Rs 60,000 Rs 1 lac (from FY2019) in the amount is spent for the treatment of a senior citizen (>=60 years).
The deduction is
Rs 80,000 Rs 1 lac (from FY2019) if the treatment cost is incurred for a very senior citizen (>=80 years).
You cannot claim the deduction if you have already claimed reimbursement for the treatment cost under any insurance policy.
You need to attach a certificate from a specialist doctor while filing income tax returns. Certificate from specialist doctors from both private and government hospitals will suffice. The list of specified ailments is provided in Rule 11DD. Major illnesses such as cancer, dementia, chronic renal failure, Parkinson disease, Hemophilia are covered.
5. Deduction for treatment cost of a dependent with disability (Section 80DD)
You can claim deduction up to Rs 75,000 for expenditure towards medical treatment, nursing, training and rehabilitation of a dependent with disability. Dependent can be spouse, parents, children and siblings.
The amount can also include payment towards any scheme for the maintenance of such dependent. In case of dependent with severe disability, the deduction limit is Rs 1.25 lacs. You need to submit a supporting medical certificate. For more details, refer to Section 80DD and Rule 11A of Income Tax Act.
6. Deduction in case of a person with a disability (Section 80U)
If the tax-payer is a person with disability, he/she can claim additional deduction of Rs 75,000 under Section 80U. There is no relation to treatment costs. In case of severe disability, the deduction limit goes up to Rs 1.25 lacs.
7. Medical expenses under Section 17(2)
This benefit was valid only till FY2018. This has been replaced by standard deduction of Rs 40,000 per year from FY2019.
Amount paid (reimbursed) by your employer towards expenses for medical treatment of you and your family is exempt from income tax to the extent of Rs 15,000 per financial year. Family includes self, spouse, children, dependent parents and siblings. This exemption is not available to self-employed. This exemption is on actual basis i.e. you are required to submit medical bills to your employer.
The post was first published on December 24, 2015. Has been updated regularly.