Health insurance is a necessity that can also help you save taxes. Generally, you can save tax on health insurance premium for a maximum of Rs 1 lakh in case you and your parents are above the age of 60 years. But did you know that you and your spouse can save more tax on health insurance premium beyond the Rs 1 lakh limit (assuming that you and your spouse earn independent taxable income)? 

Under section 80D of the Income tax act, a deduction of Rs 25,000 can be claimed for health insurance premiums including preventive healthcare check-up costs for yourself, spouse and your children. Further, if you buy health insurance for your parents, you can get an additional deduction up to Rs 50,000 from your income if your parents are senior citizens. This way you can get tax-saving deduction benefit up to Rs 75,000.

If your parents below 60 years of age, then you can get an additional deduction of Rs 25,000. Hence, the maximum tax-saving deduction that you can get on buying health insurance is up to Rs 50,000 

On the other hand, if the policyholder and his/her parents’ age is above 60 years, then he/she can get an additional deduction of Rs 50,000. Thus, in such a case, the policyholder can get a maximum deduction benefit for Rs 1 lakh. 

How can you maximise tax benefit on the entire family’s income?
If your spouse is also an earning member, then he/she can also claim deduction from income of up to Rs 50,000 by buying health insurance for his/her parents. This way your spouse can help in reducing his/her taxable income and therefore, of the family as a whole. 

Rajat Mohan, Partner, AMRG & Associates said that, suppose the taxpayer is female and married, she can also buy health insurance policy covering family members and can claim deduction under section 80D for premiums paid for herself, her husband, her children, and her parents. “Hence, in a similar manner you and your spouse can buy separate health insurance policies for your family and respective parents and claim deductions under section 80D and save more tax on your overall family’s income, .. 

However, Archit Gupta, founder and CEO, Cleartax.in said, “You can only claim deduction under section 80D on health insurance bought for your parents and not for your parents-in-law. Also, the deduction is available irrespective of whether your parents are financially dependent or not,” he added. 

This way, your spouse can buy health insurance for her parents and thereby help in maximising the overall tax-saving deduction benefit on the entire family’s income. You can save taxes for up to Rs 1.5 lakh or more (in case you and your parents are above the age of 60). 

Here’s how much a married couple can save on taxes under section 80D during a particular financial year.

Maximising overall tax-saving deduction benefit on the entire family’s income under section 80D by purchasing health insurance

Scenario*	Self and family and children (policyholder husband/wife)	Premium paid for his parents (policyholder husband)	Premium paid for her parents (policyholder wife)	Family’s total tax-saving deduction benefit
Individual and parents below 60 years	Rs 25,000	Rs 25,000	Rs 25,000	Rs 75,000
Individual and family below 60 years but parents of both spouses are above 60 years	Rs 25,000	Rs 50,000	Rs 50,000	Rs 1,25,000
Individual and family and parents of both spouses are above 60 years	Rs 50,000	Rs 50,000	Rs 50,000	Rs 1,50,000

Assuming that only one health insurance policy is bought for the family and also, each spouse buys insurance for their respective parents. 

Can you claim maximum deduction in case of having a single parent?
In case one of the insured parents passes away the other parent can continue with the same the policy. In such a scenario, the policyholder can claim the tax deduction benefit according to the actual premium paid for the policy. Anand Shrikhande, CEO and Founder, Quickinsure Insurance Brokers said, “You can continue to renew the policy with one member/parent and claim the premium as paid for one member/parent  .. 

Alok Agrawal, Partner, Deloitte India said that whether an individual pays health insurance premium for his single parent or both parents, as per the provisions of Income-tax Act, he would be eligible to claim a deduction of the total amount of premium paid subject to a maximum of Rs 25,000. This limit increases to Rs 50,000 in case the parent of the individual is a senior citizen (i.e., age is 60 years or more at any time during the financial year). “However, you can avail the above deductions  .. 

What policyholders should know
It is important to note that you should always take advice from a qualified/registered financial planner before buying health insurance. Amit Chhabra, Head- Health Insurance, Policybazaar.com said, “Health insurance shouldn’t be bought mainly for tax-saving purpose, you should buy it to reduce your financial stress in case of medical exigencies.” 

He said that it is advisable to buy a policy with a large sum insured rather than buying two policies with smaller sum insured. The ideal way to buy health insurance is that the spouse should buy a policy with maximum cover for self and family including parents. “And, if you want to maximise your tax benefit and reduce family’s tax liability, then one of the spouses can buy a health insurance policy only for his/her parents. You should know that spouses can claim deduction for health policy bought for respective parents but not for in-laws,” he said. 

Source : Economic Times