Tax benefit of health insurance and medical check-up

Health Insurance is taken out to cover the cost of medical care in case of hospitalization. Tax benefit for payment of health insurance premium can be claimed while filing income tax return.

In this article we will be discussing, provisions of section 80D to know how much tax deduction is allowed for health insurance premium payments and when such tax benefits can be taken by an Individual.

Tax deduction under section 80D is allowed only to an Individual or HUF, resident or non-resident.

In terms of section 80D, tax deduction is allowed for the amount paid to effect or to keep in force an insurance on the health of the assessee, spouse, children and parents. It does not matter whether children or parents are dependent on you or not.

Mode of Payment allowed for health insurance premium

To claim tax benefit, assess is required to pay the health insurance premium out of his income chargeable to tax during the financial year by any mode other than cash.

This means, if you are paying your health insurance premium in cash, you will be disallowed tax benefits under section 80D. You can pay your premium amount by cheque, draft, Internet banking or even by credit card to get tax advantages under section 80D.

However, mode of payment restriction is not applicable to preventive health check up. This means, you can make cash payments for preventive health check-up to get tax deduction under section 80D.

Quantum of Tax Deduction for health insurance premium

Benefit of section 80D is available based on the age of the individual who is medically insured. If age of the assessee or spouse or dependent children is below 60 years, maximum deduction that can be availed is Rs 25,000 a year.

In addition to above, an individual is also allowed tax benefits under this section for health insurance premium paid for parents. As per this section, the whole of the amount paid to effect or to keep in force an insurance on the health of the taxpayer’s parent or parents, whether dependent or not is eligible for tax deduction subject to the maximum amount of Rs. 25,000 a year.

Additional deduction of Rs 5,000 is allowed only when premium paid to effect or keep in force insurance on the health of the person who is a senior citizen. This means, if premium paid for a person who is a senior citizen of age 60 or more, maximum amount allowed is Rs 30,000 a year instead of Rs. 25,000 a year.

Tax deduction allowed to an individual under section 80D shall be the aggregate of the above two limits.

This means, if an individual paying health insurance premium for his/her family members (self, spouse and dependent children) and for parent or parents who is senior citizen, maximum tax deduction allowed under section 8D is Rs. 55000 (25000+30000).

Similarly, if the individual is of 60 years or more and he is paying health insurance premium for parents, the maximum tax deduction allowed under section 80D shall be Rs 60,000 (i.e. 30000+30000 as both are senior citizen).

Remember, tax benefit under section 80D is allowed over and above the deduction limit of Rs 1,50,000 available under section 80C of Income tax act 1961.

Tax Deduction on Preventive Health Check-ups

Limit for tax deduction on preventive health check up is within the overall ceiling of Rs 25,000 / 30,000 as the case may be.

As per section 80D, an individual can claim expenses incurred for preventive health checkups up to Rs 5,000 for each year. This means, if your health insurance premium payment for the year is Rs 20,000 and you have incurred Rs 5,000 towards health check-up, you can claim total tax deduction of Rs 25,000.

Tax deduction on Preventive Health check up is allowed if payment is for assessee, his/her family or parent or parents.

As discussed earlier, you can make cash payments for preventive health check-ups to get tax benefits under section 80D.

Table showing Maximum Amount of Tax Deduction U/S 80D
Description Insurance Premium Paid For Total Maximum amount of Deduction allowed under section 80D
Self, Spouse & Dependent ChildrenParents (whether dependent or not)  
All are below the age of 60 yrsRs. 25,000Rs. 25,000Rs. 50,000
Parents are above 60 years of age   and Self, Spouse & Dependent Children is less than 60 years Rs. 25,000Rs. 30,000Rs. 55,000
Assessee   and his parents have attained the age of 60 years and above Rs. 30,000Rs. 30,000Rs. 60,000

A non resident individual can also take tax benefit of section 80D as it’s not restricted to individuals based on residential status.

Example showing tax deduction calculation on health insurance and medical check-up

CasesMaximum amount Allowed under section 80CActual Deduction under section 80DReason
Amount paid for self, spouse and children is Rs. 200002500020000Lower of the amount paid or Rs 25,000
Amount paid for senior citizen parents is Rs. 250003000025000Lower of the amount paid or Rs 30000
Mediclaim policy of Rs. 30000 paid for self, wife and children.2500025000Lower of the amount paid or Rs 25000
Rs. 30000 paid for self, spouse and children towards Mediclaim policy and Rs. 5000 paid for preventive health check-up for self.2500025000As per section 80D Rs 5000 tax deduction for preventive health check up included in the maximum tax deduction of Rs 25000. So, aggregate tax deduction (Rs 30000+Rs 5000=Rs 35000) should not exceed Rs. 25000.

Tax deduction on medical expenditure of Very Senior Citizen

With effect from assessment year 2016-17 (financial year 2015-16), an individual can claim tax deduction for medical expenditure (instead of sum paid to effect any insurance of the health) incurred for a very senior citizen.

In terms of section 80D, if an individual has incurred medical expenditure in respect of a very senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of the very senior citizen then such individual may claim following deductions;

  • the whole of the amount paid on account of medical expenditure incurred on his health or any member of his family as does not exceed in the aggregate Rs 30,000; and
  • the whole of the amount paid on account of medical expenditure incurred on the health of any parent of the asessee, as does not exceed in the aggregate Rs 30,000.

Government has restricted the total deduction in case of medical expenditures paid for very senior citizen and medical premium paid for others.

As per section 80D, if an individual has paid health insurance premium for his family members and also incurred medical expenditure for a family member (health insurance not taken in his/her name) who is very senior citizen, then in that case total deduction will be restricted to Rs 30,000.

Similarly, in a case where health insurance premium has been paid for parent or parents and he/she has also incurred medical expenditure for a family member (health insurance not taken in his/her name) who is a very senior citizen, then the total deduction will be restricted to Rs 30,000.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.