Four tax benefits of health insurance and medical expenses you must know

As a first step in your financial plan, you must ensure that you have adequate health insurance for self and family members. Buying health insurance will serve the purpose of protecting financial instability and give access to quality health care.

Premium paid for health insurance also enjoys certain tax benefits in income tax act 1961 that you must know to reduce your tax liability.

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Section 80D – Income tax benefit on health insurance

While calculating your taxable income for a financial year, premium paid during that year for the health insurance policy can be claimed as tax deduction under section 80D of income tax act 1961.

Please remember that tax benefit available under section 80D is over and above the limit of Rs 1, 50,000 as specified under section 80C.

In order to claim tax deduction under section 80D, you need to pay the premium either through a cheque or credit card as cash payment does not qualify for tax deduction under this section.

Under section 80D, you can avail tax deduction up to Rs 25,000. If its for a senior citizen then tax deduction will be up to Rs 30,000.

To know detail provisions of section 80D, we suggest you to read our article Tax Benefits on medical insurance premium

Section 80DD – Tax deduction on health insurance premium paid for handicapped relative

Under section 80DD, you can avail tax benefits if premium paid for health insurance is for a handicapped dependent relative.

Deduction can be claimed up to Rs 75,000 if the handicapped dependent’s disability is between 40% and 80%. In case of more than 80% disability, tax deduction limit is Rs 125000.

Read our article on Section 80DD to know more about this provision

Section 80DDB – Tax benefit for medical treatment of a relative suffering disease

Medical expenses incurred by you on the treatment of your relative suffering from a specified diseases like AIDS, Parkinson’s, chronic renal failure, malignant cancers, thalassemia, haematological disorders, dementia and other specified neurological diseases can claim tax deduction of Rs 40,000 under section 80DDB.

For a senior citizen and very senior citizen, tax deduction limit is Rs 60000 and 80000 respectively.

Recommended Read – Section 80DDB – Income Tax benefit for your Medical Treatment

Section 80U – Tax Deduction for Self Suffering from disability

If you are suffering from any disability then tax deduction can be claimed under section 80U of income tax act 1961. If your disability is not less than 40% then tax deduction of Rs 75,000 can be claimed. If disability is 80% or above then you can claim a higher deduction of Rs 1,25,000.

Recommended Read – Section 80U – Tax deduction for Physically Disabled Persons

We have many health insurance policies offered by private companies like ICIC Lombard, starhealth, Apollo Munich and hdfcergo. You can buy health insurance policies from these companies.

Income tax act does not restrict you to buy health insurance plan from health insurance companies. You can buy health plans from life insurance companies to get the tax benefits. Premium paid towards medical insurance riders and critical illness qualifies to get deduction under section 80D and 80DD.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.