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Insure your health, save your income tax

Did you know that just like life insurance premiums, even health insurance premium payments (including Mediclaim) can save you tax? Read on.



Most of us know that paying life insurance premiums saves us income tax – the premium paid is deductible from our taxable income under section 80C.

(To know more, please read “Saving Income Tax – Understanding Section 80C Deductions”)

But the limit of section 80C is Rs. 1 Lakh. Is there any way you can save even more tax?

Yes, you can – by buying health insurance (Also popularly known as Mediclaim).

How much can you save?

The income tax benefit that you get for medical insurance premium payments is covered under section 80D.

As per sec 80D, premium paid for medical insurance is deductible from your income upto Rs. 15,000 per year. If you are a senior citizen, this limit is Rs. 20,000 per year.

If you are paying the medical insurance premium for your parents, an additional deduction of Rs. 15,000 per year can be claimed u/s 80D. If your parents are senior citizens, you can claim Rs. 20,000 (instead of Rs. 15,000).

Thus, you can deduct upto Rs. 35,000 from your taxable income for medical insurance premiums paid.

Please remember that this limit is totally distinct and separate from the Rs. 1 Lakh limit of section 80C.


Can you save tax while buying medical insurance for others?

Yes, you can!

The premiums paid for yourself, your spouse (dependent or not dependent), your parents (dependent or not dependent) and your dependent children are considered for deduction u/s 80D.

In fact, as mentioned above, you can claim an extra deduction of upto Rs. 15,000 per year for medical insurance premiums paid for your parents (Rs. 20,000 if they are senior citizens)!

You can not claim premiums paid for your in-laws (including your wife’s / husband’s parents).

Example

Let’s say you pay a medical insurance premium of Rs. 8,000 for yourself, Rs. 7,500 for your spouse, and Rs. 18,000 for your father.

The deduction available to you would be:

  • Rs. 15,000 for the premium paid for yourself and spouse (Rs. 8,000 + Rs. 7,500 = Rs. 15,500 – with a cap of Rs. 15,000)
  • Rs. 15,000 for the premium paid for your father if he is not a senior citizen (ceiling of Rs. 15,000) OR Rs. 18,000 if he is a senior citizen (as Rs. 18,000 is less than the upper limit of Rs. 20,000)

Thus, the total deduction available to you under section 80D would be Rs. 30,000 if your father is not a senior citizen. It would be Rs. 33,000 if he is a senior citizen.


Sec 80D and Hindu Undivided Family (HUF)

Even when you file the income tax return as an HUF, the medical premiums paid for any member of the HUF can be claimed for deduction u/s 80D as per the above limit.

In this case, the deduction can be claimed only if the premium is paid by the HUF.

Section 80D and Private Insurers

There is no restriction on whom you can buy the medical insurance from.

Irrespective of whether you buy medical insurance from a Public Sector Undertaking (PSU) insurer or from a private insurer, you can claim deduction under section 80D.

Mode of Payment

Any mode of payment, except cash, is acceptable for claiming this deduction.


Other Factors

There is one important thing that needs to be kept in mind – the medical insurance premium has to be paid from your taxable income of that year if you want to claim the deduction u/s 80D.

You should not have paid the premium from your savings or gifts received by you.

Conclusion

Section 80D gives you an avenue beyond section 80C to save income tax. You can deduct upto Rs. 35,000 from your taxable income for medical insurance (or Mediclaim) premiums paid.

So, go ahead and insure your health – saving income tax at the same time!

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