Health insurance cover has become a necessary expense for every individual now. The insurance cover may include self or family including your parents. It is good to be aware on how you can save your tax, with a Private health insurance expense. It is not always necessary to show investment to reduce your tax outgo.

How to go about seeking tax benefits with the addition of private health insurance policy?

Tax Benefits of Health Policy Amount (Rs.)
Section 80D- Policy for self 25,000 (max)
Section 80D- Policy for own, spouse, parents, and children 25,000 (max)
Section 80D- Policy for self (as a senior citizen) 30,000 (max)
Section 80D- Policy for parents (who are senior citizens) 25,000 (max)
Section 80D- Policy for parents (who are not senior citizens) 30,000 (max)
Section 80D- Preventive health checkup for own, parents, or family 5000 (max)
Section 80D- Policy for own, spouse, parents, and children 25,000 (max)
Section 80DD- Premium for dependent handicap 75,000
Section 80DD- Premium for dependent handicap (severe cases) 125,000
Section 80DDB premium covering special diseases (under 60 years of age) 40,000
Section 80DDB- premium covering special diseases (over 60 years of age) 60,000
Section 80DDB- premium covering special diseases (over 80 years of age) 80,000

We present different scenarios for approaching tax-benefits

In case your company has provided you a group medical insurance cover, any premium amount paid by the firm is not taxable in the hands of the employee. The health insurance cover (whether corporate or private) may include your family members as well.

Example 1– Mr. X has been provided a group insurance cover for Rs.10,00,000 by his company. The company was paying a certain premium amount for X family cover. His mother requires dental implants, which is covered under the insurance policy. X made a claim of Rs. 200,000 under the insurance policy. The Rs. 200,000 claim is tax-free.

Example 2– Suppose the dental treatment costs was not covered under the group medical insurance policy. Mr. X took add-on coverage to the standard group policy. The additional premium amount will also be tax-free, and tax benefits can be availed (subject to the conditions shared above).

Smart tip: Ideally your medical insurance cover should include all hospitalisation expenses, including ambulance charges. It will be a tax -free expense.

Mr. X has made following payments during a financial year:

  • Payment of health insurance policy for self: Rs. 20,000
  • Payment of health insurance policy for spouse: Rs. 10,000
  • Payment of health insurance policy for parents (senior citizen): Rs.  40,000
  • Payments for preventive health checkup (for parents): Rs. 10,000

His entitlement for tax benefits under section 80D will be

Scenario (of Mr. X) Tax-Rebate Reason
Premium Paid of Rs. 20,000 for self

 

Preventive Healthcare Payment of Rs. 10,000 for spouse

Rs. 20,000

 

Rs. 5,000

Amount included in maximum limit

 

Since maximum amount for deduction cannot exceed Rs. 25,000

Premium Paid of Rs. 40,000 for parents’ (both senior citizens) health insurance

 

Payments of Rs. 10,000 for preventive health checkup of parents (Senior citizens)

Rs. 30,000 The maximum limit is Rs. 30,000 for premium payment for parents who are senior citizens

 

Payments for preventive health checkup (for parents):Rs. 10,000 will not qualify in this case (as the maximum limit deduction cannot exceed Rs. 30,000).

Suppose Mr X was paying 15,000 for his parents (Senior Citizens) and incurred an expense of Rs. 10,000 for the preventive health checkup. 15,000 + 5,000 = 20,000 Total entitlement for parents’ insurance would have been Rs. 15,000 + 5,000 =Rs. 20,000(Rs. 5,000 is the maximum limit for preventive health checkup of Senior Citizens.)

 Smart tip: Make your premium payments cashless, as cash payments are not tax-exempted.

Section 80DD – Illustration

Given scenario (of Mr X) The amount paid (Rs.) Tax-Rebate
Premium paid for dependent handicap 40,000 Rs. 40,000
Expense incurred for rehabilitation of dependent handicapped 15,000 Rs. 10,000 (subject to maximum limit of Rs. 50,000)
Premium paid for rehabilitation of dependent handicapped 1,00,000 Rs. 1,00,000
Premium paid for self, and Mr. X is suffering from cancer 40,000 Rs. 40,000
Premium paid for the spouse, and Mrs. X is suffering from cancer 50,000 Rs. 40,000 (subject to maximum limit of Rs. 40,000)

More Under Income Tax

Posted Under

Category : Income Tax (25527)
Type : Articles (14984)
Tags : Section 80D (49) Section 80DD (19)

One response to “How your health insurance policy can cut your tax outgo? (a.y. 2017-18)”

  1. P K S Manian says:

    80D -self & spouse-both senior citizens a/y2017/18 max deduction for self (who pays premium)

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