What are the tax benefits of health insurance under Section 80D?

Under Section 80D of the Income Tax Act, you can claim tax deductions of up to ₹25,000 for health insurance premiums for yourself and your family, and an additional ₹25,000–₹50,000 for parents, depending on their age.

Can I claim tax deduction for life insurance premiums under Section 80C?

Yes, premiums paid for life insurance policies are eligible for tax deduction under Section 80C, up to a limit of ₹1.5 lakh per financial year.

Are both health and life insurance premiums tax deductible?

Yes, health insurance premiums qualify under Section 80D, while life insurance premiums fall under Section 80C, allowing you to claim both deductions if you meet the eligibility criteria.

Is there a limit to how much I can claim under Section 80D?

Yes, individuals can claim up to ₹25,000 for themselves and family, and an additional ₹25,000–₹50,000 for parents depending on their age, totaling a maximum of ₹1,00,000 in specific cases.

Tax Deductions on Health and Life Insurance Premiums

AssetPlus
Jul 16
6 min read

Updated: Aug 28

Health and life insurance don't just protect your family; they can also reduce your income tax.

From covering your parents' medical needs to securing your children's future, the premiums you pay can offer valuable tax benefits under key sections of the Income Tax Act:

Tax Deductions on Health and Life Insurance Premiums

Section 80D: Health insurance deductions.
Section 80C: Life insurance premium benefits.
Section 10(10D): Tax-free maturity and death benefits.

Yet, many taxpayers miss out due to poor planning. In this guide, we'll break down eligibility rules, deduction limits, tax-free payout conditions, and smart tips to help you and your clients maximize these benefits.

Health Insurance Tax Deductions - Section 80D

Section 80D is a fundamental section under the Indian Income Tax Act that allows tax deductions on premium payments for health insurance policies.

Who Can Claim

Individuals: Spouse, children, parents, and themselves.
HUFs: Policy bought for any member of the family.

What's Covered

Premiums on health insurance for:

Self.
Spouse.
Dependent children.
Parents (dependent or independent).

Deduction Limits

₹25,000: When the insured is below 60 years of age.
₹50,000: In parents who are 60 years or older.
₹1,00,000: Where parents and the taxpayer are senior citizens.

Additional Tax Benefits

Preventive Health Check-ups: Up to ₹5,000 (from the above limit).
Top-Up & Critical Illness Plans: If covered by eligible members.
Includes premium paid for dependent children.

Cash Payment Restriction: Payment via banking channels only (except check-ups)

Bonus Tip: Ask clients to include senior citizen parents in another policy to get the highest ₹50,000 benefit. MFDs can use these benefits to design family-oriented plans with optimized tax relief. AssetPlus helps you compare policies that offer such deductions.

Life Insurance Tax Benefits - Section 80C

Life insurance provides financial support to dependents and also offers significant tax benefits on life insurance premiums under Section 80C.

Eligibility to Claim

Individuals and HUFs who make premium payments for:

Self.
Spouse.
Dependent or independent children.

Deduction Limit

₹1.5 lakh in each financial year (clubbed with other 80C instruments like PPF, ELSS, home loan size, etc.)

Eligibility Requirements:

For policies bought on or after April 1, 2012, the premium should not exceed 10% of the sum insured.
For policies bought between April 2003 and March 2012: The Premium shall be up to 20%
The policy should continue for a minimum of 2 years; premature withdrawal cancels the availed deductions.

Eligible Life Insurance types:

Term Life Insurance.
Endowment Policies.
ULIPs (subject to limitations).
Whole Life and Money-back Policies.

Pro Tip: Make payment in the financial year in which the deduction is claimed. Club term insurance and education plans for children under 80C for multi-goal tax planning for clients.

Digital-first MFDs on AssetPlus can monitor policy maturity calendars and premium ratios, ensure 80C compliance, and avoid reversals.

Maturity Benefits - Section 10(10D)

While sections 80C and 80D offer tax deductions on health and life insurance premiums, Section 10(10D) pertains to the taxation of life insurance maturity proceeds. Except in certain situations, the proceeds are exempt from income tax.

What Is Covered Under 10(10D)

Maturity Amounts received at policy maturity.
Death Benefits to Nominees.
Survival Benefits in money-back or endowment policies.
Bonuses (for a participating policy).

Conditions for Tax Exemption

The premium must not be more than 10% of the sum assured (for policies issued on or after April 1, 2012).
Must retain the policy for a minimum period of 2 years.
For ULIPs: Must retain for 5 years.

Special Cases:

ULIPs bought on or after February 1, 2021: If the annual premium crosses ₹2.5 lakh, gains would be treated as capital gains
Taxation of single-premium or large-sum policies in case of non-satisfaction of exemption conditions.

TDS Applicability:

In case 10(10D), conditions are not satisfied; the insurer withholds TDS at 5% of the income portion (not of the total sum)
This applies to large policies that lack premium-to-sum-assured ratios

Bonus Tip: Double-check the Form 10(10D) declaration with your insurer before availing maturity proceeds. This prevents unnecessary tax deductions upon payout.

With changing rules and thresholds, MFDs need to keep up with Section 10(10D) requirements. By using web-based tools such as AssetPlus, it is more convenient to automate policy tracking and tax-free versus taxable payouts.

Further Scenarios: What Is and Isn't Eligible

Not all life and health insurance plans come under tax relief. You must learn what is included according to eligibility to avoid making mistakes while submitting returns.

Exclusions Under Section 80D

Premiums paid for in-laws, siblings, grandparents, or any other family members (except under HUF).
Cash premium payments (except for preventive check-ups).

Exclusions Under Section 80C:

Premiums paid on parents or siblings are not deductible.
Policies lapsed within 2 years or where the premium exceeds the specified limits.

Employer Group Insurance Plans:

Premiums paid entirely by the employer.
If paid partly by the employee, you get a tax deduction only for the employee's portion.

Term vs ULIP

Both are covered under 80C if within the premium limits.
ULIPs over ₹2.5 lakh a year (introduced after 2021) lose Section 10(10D) relief.

Expert Tip: The most frequent tax deduction denial is because of unclear eligibility parameters. MFDs must help clients with key parameters before making submissions.

For multiple policyholders (term, ULIP, endowment), create an elaborate deduction eligibility checklist and match them with both their ITR sections. AssetPlus can help with dashboard aggregations and reminders through this checklist.

Intelligent Tips to Maximize Your Tax Deductions

Though tax advantages in insurance are clearly defined, efficient planning can lead to increased savings.

Tips for MFDs and Clients

Utilize UPI, cards, and net banking. Cash is not permitted, except for ₹5,000 check payments.
For claiming insurance on tax returns, make payments during the financial year (April-March).
Claim preventive health check-up deductions annually; ₹5,000 may not look like much, but it does add up.
Purchase senior citizen health policies to take advantage of the ₹50,000 deduction under 80D
Combine term coverage with critical illness or add-on health policies for better coverage and higher tax deductions.
Keep digital copies of receipts, payment reminders, and policy bonds as ITR supports

Avoid These Mistakes

Even with good policy structures, you may lose tax benefits by committing significant mistakes. Some of them are:

Brothers, sisters-in-law, grandparents, or elder relatives with no dependency (except HUF arrangement) are not eligible under Section 80D or 80C.
The premium should not exceed 10% of the sum assured for 80C deductions made after 2012.
Several taxpayers fail to claim the ₹5,000 preventive check-up allowance despite incurring negligible medical expenses.
Employer-paid group insurance is not deductible.
Policies surrendered within 2 years (5 years in the case of ULIPs) trigger tax deduction reversal.
Without case 10(10D) conditions being fulfilled, 5% TDS has to be paid on the maturity income portion.
Incorrect selection of sections (i.e., 80C vs. 80CCC), policy number, or premium amount is the most frequent cause of notices or disallowances.

Pro Tip: Keep a soft checklist for all policies, including premium, deduction portion, sum assured, nominee information, and maturity dates. AssetPlus dashboards accomplish this automatically for MFDs and customers.

To Wrap Up

Premium tax deductions on health and life insurance are among the most precious assets for the Indian taxpayer. These facilities offer future financial security and measurable tax benefits today.

The key to maximizing tax deductions is understanding tax eligibility, maintaining accurate documents, and timing premium payments effectively.

The motto? Don't buy for the tax benefit. The incentive is financial security; tax benefits are just the icing on the cake.

On this note, AssetPlus helps mutual fund distributors and financial experts plan and track insurance deductions more effectively through smart tools, compliance-ready dashboards, and timely alerts. If you're looking to streamline insurance-based tax planning for FY 2025 and beyond, connect with your AssetPlus expert for personalized support.

Schedule a demo to learn more!

FAQs

Can you deduct health insurance premiums under Indian taxation?

Yes. Premiums paid for self, spouse, children, and parents are eligible for deduction under Section 80D—up to ₹100,000, depending on age and the insured's family size.

What are the tax benefits of health insurance in India?

The premium paid towards health insurance can be claimed under Section 80D deductions. ₹25,000 on self/spouse/children and an additional ₹50,000 on parents (senior citizens).

Are the income tax benefits on insurance premiums under Section 80C deductible for tax?

Yes. The premium for self, spouse, or children may be a maximum of ₹1.5 lakh, subject to the condition that the premium does not exceed 10% of the sum assured.

What is a tax-free life insurance payout?

This is when maturity proceeds of life insurance are tax-free, subject to conditions under Section 10(10D). However, ULIPs with premiums exceeding ₹2.5 lakh annually (bought after February 2021) may be subject to capital gains tax.

What is a self-employed health insurance deduction?

Section 80C life insurance premium tax allowance and section 80D tax benefits of health insurance are accessible to self-employed individuals, just like salaried individuals.