Health Insurance for Tax Savings
One of the long-standing demands from Budget 2025-26 was the increase in health insurance tax deductions under Section 80D. The current limits are INR 25,000 for general citizens and INR 50,000 for senior citizens. Despite speculations, no amendments were announced in the Budget for FY 2025-26.
Regardless of the tax deduction limits, certain changes in the tax regime are seen as a boost to increase insurance penetration in India. The insurance sector would now accept 100% of FDI (Foreign Direct Investments), up from the previous 74%.
In this article, we will uncover the different health insurance tax deductions, their benefits, and how you can make the most of them. Before we move on, let us understand health insurance first.
Key Facts
Section 80D of the Income Tax Act, 1961, has not seen changes in tax deduction limits for a long time. Limits were increased from INR 15,000 to INR 25,000 for general citizens in 2015, and from INR 30,000 to INR 50,000 for senior citizens in 2018.
What Is Health Insurance?
Historically, preventive medical care hasn't been a primary focus for many Indians. However, the recent global pandemic has significantly changed the perception of health insurance.
Investing in health insurance plans will offer you a financial safety net against hefty medical bills. You and your family are covered for daycare treatments, maternity expenses, and alternative treatments.
Available as individual, family, and group health insurance plans, they come with tax deductions.
For more information, read more on What is Health Insurance?
New Income Tax Slabs
The budget presented by Finance Minister Nirmala Sitharaman for FY 2025-26 has also introduced new income tax slabs as follows:
| Income (INR) | Tax Slabs |
|---|---|
| 0 to 4 Lakhs | Nil |
| 4 to 8 Lakhs | 5% |
| 8 to 12 Lakhs | 10% |
| 12 to 16 Lakhs | 15% |
| 16 to 20 Lakhs | 20% |
| 20 to 24 Lakhs | 25% |
| Above 24 Lakhs | 30% |
Under the new tax regime, individuals earning up to ₹12 lakh annually will not have to pay any income tax. The aim is to reduce the tax burden from the different income sections of society, especially the financially burdened middle class.
Additional Changes
- The government will present the new Income Tax Bill.
- Tax Deduction at Source will be rationalized for easy compliance.
- Tax Deduction Limits for senior citizens doubled to INR 1 Lakh.
Introduction to Section 80D
The Government of India introduced Section 80D of the Income Tax Act.
Every individual and Hindu Undivided Family (HUF) is eligible to claim tax deductions for two kinds of premium payments:
- For self and family
- For dependent parents
Health insurance tax benefits under Section 80D apply to all kinds of health plans, including top-ups and critical illness plans. Moreover, Non-Resident Indians (NRIs) can also claim tax deductions under Section 80D for health plans purchased in India.
Eligibility for Tax Benefits on Health Insurance
Indian Nationals and NRIs (Non-Resident Indians), along with Hindu Undivided Families (HUFs), are eligible for tax benefits on health insurance under Section 80D of the Income Tax Act, 1961.
Tax Deductions Under Section 80D
You can claim the following tax deductions under Section 80D as per the Income Tax Act, 1961.
| Tax Deduction | Applicable On Health Insurance |
|---|---|
| Up to INR 25,000 | For self, spouse, dependent children, or parents |
| Up to INR 50,000 | For parents (60 years and above) |
| Up to INR 5,000 | For preventive health check-ups for self, spouse, dependent children, and parents. |
| INR 25,000 | For NRIs (Non-Resident Indians) |
Tax Benefits on Health Insurance Premium: Examples
Let us further understand these tax deductions with examples:
Example 1
Mr. Nitin invests in a family floater health insurance plan. The family floater covers Mr. Nitin, his spouse, and 1 dependent child (all below 60 years of age). The annual policy premium paid is INR 18,000.
Furthermore, Mr. Nitin invests in a senior citizen health insurance plan (both parents above 60 years of age) for which he pays an annual premium of INR 14,000.
As per the table mentioned above, Mr. Nitin is eligible for a total deduction of up to INR 75,000 under Section 80D, including INR 25,000 for the family floater health plan and INR 50,000 for the senior citizen health plan.
This shows that the total premium amount of INR 32,000 paid by him for both health plans is well under tax deduction limits and can be claimed as a deduction at the end of every financial year till the policies are active.
- Family Floater Plan Premium: INR 18,000
- Senior Citizen Plan Premium: INR 14,000
- Total Premium Paid: INR 32,000
- Total Eligible Deduction: INR 75,000 (INR 25,000 for family + INR 50,000 for parents)
Example 2: Tax Deductions Including Preventive Health Check-ups
Mr. Ashok has a family of 6 members:
- Mr. Ashok (35 Years)
- His Wife (32 Years)
- 2 dependent children (11 and 7 years)
- Father (65 Years)
- Mother (63 Years)
Mr. Ashok purchases a family floater plan covering himself, his wife, and two dependent children, paying an annual premium of INR 30,000. He also pays INR 15,000 for their preventive health check-ups.
| Cover | Actual Expenses | Tax Deductions Under Section 80D | Total Deduction Applied |
|---|---|---|---|
| Premium paid for self, spouse, and children | INR 30,000 | INR 25,000 | INR 25,000 |
| Amount paid for preventive health check-ups for self, spouse, and children | INR 15,000 | INR 5,000 | INR 5,000 |
| Total for Family Floater Health Plan | INR 45,000 | INR 25,000 | INR 25,000 |
Additionally, Mr. Ashok pays an annual premium of INR 52,000 for senior citizen health insurance for his parents. He also spends INR 10,000 on their preventive medical check-ups. Let us understand all the tax deductions for Mr. Ashok through the table mentioned below:
| Cover | Actual Expenses | Tax Deductions Under Section 80D | Total Deduction Applied |
|---|---|---|---|
| Premium paid for senior citizens’ health plan | INR 52,000 | INR 50,000 | INR 50,000 |
| Preventive Health check-ups for parents | INR 10,000 | INR 5,000 | INR 5,000 |
| Total for Senior Citizens Health Plan | INR 62,000 | INR 50,000 | INR 50,000 |
The total tax deductions Mr. Ashok can avail for both family floater and senior citizen health insurance in a financial year is INR 75,000.
Acceptable Modes of Payment for Health Insurance Tax Deductions
You can claim tax deductions under Section 80D for health insurance premiums paid via online methods such as UPI, Debit and Credit Cards, bank drafts, or cheques. However, premiums paid in cash are not eligible for tax deductions.
In the case of preventive health check-ups, you are eligible to claim tax deductions through cash as well as digital payments.
Health Insurance Tax Benefits Other Than Section 80D
Beyond Section 80D, there are other tax deductions applicable to health-related expenses. These are discussed below:
Under Section 80DD
Under Section 80DD, the annual limit for tax deductions for taking care of a dependent family member with a severe disability (80% or more) is INR 1.5 Lakhs. Dependents include:
- Parents
- Spouse
- Dependent Children
- Siblings, or any other family member.
When filing income tax returns, a medical disability certificate issued by a state or central government medical board must be submitted to claim tax benefits on health insurance.
Under Section 80DDB
Applicable to individuals and HUFs for expenses incurred on treatment for specific illnesses, including:
- Specific neurological ailments with a disability of 40% or more
- Malignant cancers (diagnosed and certified by an oncologist)
- AIDS
- Chronic Renal Failure
- Haemophilia
- Thalassaemia
Tax Deduction Limits Under Section 80DDB
- Up to INR 40,000 for below 60 years
- Up to INR 1 Lakh for 60 years but below 80 years of age
- Up to INR 1 Lakh for 80 years and above
Tax Deductions on Long-Term Health Insurance Plans
If you have purchased a long-term health insurance plan (e.g., for 2 or 3 years), you are eligible for tax deductions under Section 80D. Your health insurer will provide a certificate stating the premium paid, allowing you to claim proportionate tax deductions for each financial year covered by the policy.
Factors to Keep in Mind for Health Insurance Tax Benefits
Consider these factors before you claim health insurance tax benefits:
- Make sure to pay health insurance premiums online via UPI, Credit/Debit Cards, Bank Draft, Cheque, etc.
- If you have a family floater health plan and a senior citizen health insurance for your parents separately, you can claim tax benefits for both.
- A receipt for health insurance premium payment is mandatory to claim tax deductions.
- A disability certificate from a state or central government medical board is required to claim tax deductions under Section 80DD.
- You are not eligible to claim tax deductions for health insurance coverage provided to you by your employer.
Final Verdict
If you are under the misconception that health plans are mere protection plans for you and your family against medical bills, you may be mistaken. The multiple tax benefits associated with health insurance plans provide a strong incentive to invest in comprehensive coverage.
To understand how Sections 80D, 80DD, and 80DDB can benefit you financially, refer to the article above. For any further clarification, contact us at 1800-4200-269.
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