Does Health Insurance Save Your Tax?

Health Insurance Tax Benefits

Health Insurance cover has become an inevitable part of life. It keeps you prepared at the times of medical emergencies without even worrying about expensive medical bills.

Only a health insurance plan can ensure your best medical facilities in emergency situations. Health plans are also necessary to protect against the rise in the inflation rate in India which in turn increases medical expenses from time to time.

Benefits of Health Insurance Plans

Some of the key benefits of health insurance plans are:

  • Cashless Hospitalization – All major insurers offer cashless hospital admission in their network hospitals.
  • Medical Expense Cover – It covers all medical expenses including cost of treatment, nursing, room rent, surgeries, etc.
  • Critical Illness Cover – It provides protection against some of the severe ailments like cancer, tumor, liver dysfunction, etc. Some of the best insurance providers offer critical ailment coverage as add-on facility along with basic insurance.
  • Income Tax Benefits – Medical insurance policy not only provides all-round health cover to you and your family but it does also help you saving income tax every financial year. As per the norms of section 80D of Indian income tax law, the amount you contribute towards the payment of the premiums of healthcare plans for you, your family, and parents are subjected to tax deduction.

How to Maximize Tax Benefit on Health Insurance Policy?

Indian IT law not only provides tax benefits for the premiums payment of healthcare plans for you and your family but also for the payment of health insurance premiums you are liable to pay for your parents. However, choosing the right healthcare option could maximize your tax saving on health insurance.

You can get tax exemption up to ₹25 thousand for you and your family (including spouse and children) if you are below the age of 60 and can get an exemption of ₹30 thousand after the age of 60. You are eligible to get an additional exemption of ₹30 thousand on income taxes if you are responsible to pay the health insurance premiums of your parents too.

Therefore, in order to maximize the benefit of income tax saving, go for a separate health plan for you and your family, a health plan for your parents.

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Adding your parents, if they are above 60, to the family floater plan could unnecessarily increase the premiums. So, it is wise to procure a separate health plan for your parents to avail of dual tax benefits on health insurance. Below is a chart showing the amount of tax benefit you could receive at various conditions under section 80D of IT law:

ConditionTax Benefit on Health Insurance
An individual below the age of 60yrs pays health insurance premiums for self and parents below the age of 60yrs₹50 thousand
An individual below the age of 60yrs pays health insurance premiums for self and parents above the age of 60yrs₹55 thousand
An individual above the age of 60yrs pays health insurance premiums for self and parents above the age of 60yrs₹60 thousand

Things to Know About Health Insurance Tax Benefit

The best part of health insurance policy is that it allows you to save tax beyond the limits of section 80C of IT law, which allows tax exemption up to ₹1 lakh and 50 thousand. Here are a few things that make healthcare plans more attractive:

  • Tax Benefit on Health Check-Ups – Staying within your tax benefit limits, you can also claim for a tax deduction on health check-up expenses. If your tax benefit limit on a health plan is ₹25 thousand and you pay a premium of ₹20 thousand. You can claim a deduction for health check-up expenses up to ₹5 thousand.
  • Tax Benefit on Life Insurance Riders – Tax benefits under the norms of sec. 80D does not limit you to buy health insurance policies only from health insurance providing companies. You can buy health insurance riders from life insurance companies as well. Similar tax benefits can be received for medical cover riders and critical ailments cover within life insurance plans too.
  • Similar Tax Benefit for All Healthcare Plans – You can avail the same tax exemption benefit on all types of healthcare policies. Be it a fixed benefit plan or indemnity plan purchased from health insurance providers like or general insurance providers, sec. 80D offers a tax deduction on any health plan equally.
  • Tax Exemption on Part Payment – Tax exemption is also applicable on part payment of health insurance premiums.

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Limitation of Health Insurance Tax Benefit

  • No Income Tax Benefit on Payment Through Cash – You cannot claim for a tax deduction on your healthcare plan if premium payment has been made through cash. Only payments of premium made through demand draft, credit/debit card, cheque, or net banking are considered eligible for tax benefit.
  • No Income Tax Benefit on Lapsed Health Plans – Even though some premium payment has been made on the current financial year, once the health plan gets lapsed no further tax benefits can be claimed.

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