Health Insurance Tax Benefits (under Section 80D) for FY 2018-19 / AY 2019-20

Health Insurance (or) Mediclaim insurance is a must-have for all. Considering the rate at which medical costs are rising, it is very important to have sufficient medical insurance coverage. The medical inflation in India is increasing at a significant rate almost 12-15 per cent every year. Therefore, it is critical to have an adequate health cover, it is even more important for senior citizens.

Absence of health insurance can wipe out your savings. Having sufficient coverage will safeguard you and your dependents from getting into financial crisis during hospitalization or critical illnesses’ treatments or accidents.

Besides medical coverage, health insurance plans can provide Tax benefits to you. The premium paid towards medical insurance is tax deductible under section 80D of the Income Tax Act, 1961.

You can claim tax deductions, provided you are paying the premium on a mediclaim policy which is in the name of

• Yourself (and / or)
• Your Spouse (and / or)
• Your Parents (Parents need not be dependent on you) (and / or)
• Dependent Children

Section 80D | Health Insurance Tax Benefits | Budget 2018 Proposals

In the union budget 2018, the government of India has proposed the below changes with respect to deductions available on Health Insurance and/or towards Medical treatment ;

• Health Insurance & Senior Citizens : In Budget 2018, it has been proposed to raise the maximum tax deduction limit for senior citizens under Section 80D of the Indian Income Tax Act 1961. The current limit of tax deduction allowed for FY 2017-18 for senior citizens is Rs. 30,000 which will be increased to Rs 50,000, from FY 2018-19 (AY 2019-20) onwards.
  • Under Section 80D an assessee, being an individual or a Hindu undivided family, can claim a deduction in respect of payments towards annual premium on health insurance policy, or preventive health check-up / medical expenditure in respect of Senior citizen (above 60 years of age).
  • As of FY 2017-18, only Very Senior Citizens (who are above 80 years of age), can claim a deduction of up to Rs 30,000 incurred towards medical expenditure, in case they don’t have health insurance. The Budget 2018 has increased this to Rs 50,000 and also allowed the same flexibility to senior citizens. Even individuals who pay premiums for their dependent senior citizens parents can claim the additional deduction on health insurance premium (or) medical expenditure
• Single premium Health Insurance policy / Multi-year Mediclaim policy :
  • In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.

Tax deduction of Health Insurance Premium (Section 80d)

Below table has the list of quantum of tax deductions applicable on health insurance premiums. The below limits are applicable for Financial Year 2017-2018 (or) Assessment Year (2018-2019).

Budget 2018-19 & Revised limits u/s Section 80D for FY 2018-19

Health insurance premium paid for Self, Spouse or dependent children is tax deductible upto Rs 25,000. If any one of the persons specified is a senior citizen and Mediclaim Insurance premium is paid for such senior citizen then the deduction amount will be Rs. 50,000 from FY 2018-19 (AY 2019-20).

Medical Insurance Premium & Section 80D | Examples

Example 1 : Mr Reddy (35 years) has employer’s mediclaim coverage. He pays Rs 15,000 as premium. The coverage is applicable for Mr & Mrs Reddy and their son. He  has also included his parents (father 55 years & mother 52 years) under his employer’s medical insurance scheme. For parents coverage he pays Rs 20,000. He has also incurred Rs 8,000 for preventive health check-ups towards his family. He wants to know how much he can claim as total tax deduction under Section 80d?

Since no one in the family has attained 60 years of age, Mr Reddy can claim a tax deduction of Rs 40,000 (Rs 15,000 + Rs 20,000 + Rs 5000).

Example 2 : Mr Saxena (45 years) is a self-employed person. He has taken Health insurance plan and pays a premium of Rs 26,000. He also pays Rs 61,000 towards his parents’ medical treatment ( his Father’s age is 72 years & mother’s age is 68 years). What is the total tax deduction application in his case?

Mr Saxena can claim a total tax deduction of Rs 75,000 only (Rs 25,000 + Rs 50,000).

Preventive Health checkup & Section 80D | Example

Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above.

Example – Mr Mehta (65 years) has a mediclaim policy and paid Rs 55,000 as premium . He also spent Rs 6,000 towards health check-up. He wants to know what is the total tax deductible amount?

Since he is a senior citizen, the medical insurance premium to the extent of Rs 50,000 can be claimed as tax deduction under Section 80D. Even though he incurred Rs 61,000 ( Rs 55 k + 6k) as expenses, he can  claim tax deduction to the extent of Rs 50,000 only.

Multi-year Health Insurance policy & Section 80D | Example

If you prefer to pay insurance premiums for multiple years in one year itself (you may get discount on premium rates), the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available (subject to the overall monetary limit).

For example : Mr Rahul (30 years) wants to buy a mediclaim cover for self. He finds out that the premium rate is Rs 20,000 per policy year. However, the same plan is available at the rate of Rs 38,000 p.a. for two policy years (a discount of Rs 2,000). So, he buys a multi-year plan and pays the two years premium in one financial year itself. He wants to know what is the total tax deductible amount?

As per the current rules (FY 2017-18), you are only allowed to claim a deduction in the first year that too up to Rs 25,000 only. As per proposals in the 2018 Budget, Rahul would be able to claim the total premium paid, proportionately, over the 2-year period, which would mean a tax deduction of Rs 19,000 p.a. in both the financial years.

Standard Deduction in-lieu of Medical Allowance – Budget 2018 

Currently (FY 2017-18), you can get medical allowance of upto Rs 15,000 as an exempted income from your Gross salary. To claim this, you need to submit medical bills to your employer and get the allowance benefit. The medical reimbursement allowance is exempted under Section 10 of the Income Tax Act.

If you have submitted medical bills (to your employer) towards medical allowance and also paid premium towards your mediclaim (health insurance) then both of them will be listed in your Form-16 under different sections as shown below (click on the images to open them in new browser window).

From FY 2018-19, a standard deduction of Rs 40,000 in lieu of travel, medical expense reimbursement and other allowances has been proposed for salaried employees and pensioners. To claim this standard deduction, there is no need to submit medical bills to your employer.

As per proposal, irrespective of amount of taxable salary the assessee will be entitled to get a deduction of Rs.40,000 or taxable salary, whichever is less. Thus suppose if a person has worked for few days (or) months and his salary was just Rs 40,000 for a previous year, then he will be entitled to deduction equal to salary being the same amount. If his salary is less, say Rs 30,000 the deduction shall be restricted to Rs 30,000. If salary exceeds amount of Rs 40,000, the deduction shall be restricted to Rs 40,000.

Important points on Medical insurance policies & Tax benefits

• You can claim tax deductions on mediclaim plans provided by your employer or on policies taken by you (independent of your employment). The tax deduction is applicable on both health insurance and mediclaim policies.
• Premium amount can not be paid in cash. Mode of payment can be anything (through credit card, net banking etc.,) except cash payment.
• You can take medical insurance policy on your dependent children and claim tax deductions too. If they are aged above 18 years and employed then they can not be covered. Male children if not employed then they can be covered upto 25 years. Whereas, female children can be covered until she gets married (only if she is unemployed).
• If you are paying health insurance premiums of your in-laws then you can not claim tax deductions. However your spouse can pay the premiums from her taxable income and get the tax benefits.
• If you are paying medical insurance premiums on behalf of your sister or brother then you can not claim tax deductions.
• Only premium amount can be claimed as a tax deduction. Do not include the service tax amount.
• If you have bought a life insurance policy with a Critical Illness rider then Tax deductions on premiums paid towards critical illness rider can be claimed under Section 80D.

A word of Advice : Kindly note that having a health insurance plan is not the end of your ‘medical insurance’ planning. In fact, it is your first-line of defense only. Considering the ever-increasing medical treatment expenses in India, you have to plan for a mediclaim /family floater + a Super top up plan + an Emergency fund for unforeseen consequences. Don’t depend entirely on health insurance plan alone!

Continue reading :

• Difference Between Individual (Personal) & Employer based Health Insurance Plans – Pros & Cons
• Latest Health Insurance Incurred Claims Ratio 2016-17 | IRDA Annual Report | Top Health Insurance Companies 2018
• 11 vital factors to consider when choosing the Best Health Insurance Plan!
• Best Health Insurance Comparison Websites / Portals
• Should NRIs buy Health Insurance in India?
• Income Tax Deductions List FY 2018-19 | List of important Income Tax Exemptions for AY 2019-20

(Image courtesy of digitalart at FreeDigitalPhotos.net) (Post published on : 27-February-2018)