Maximising Tax Benefits with Health & Term Insurance Under Sections 80C & 80D

Understanding insurance and its planning is important for your finances, as it protects you and helps you save taxes. Health and term insurance are important for reducing your taxable income under Section 80D and Section 80C of the Income Tax Act.

In this article, we look at how you can maximise tax savings with your medical and term insurance, focusing on understanding Section 80D and Section 80C.

How Insurance Helps Save Taxes?

Insurance is more than just a safety net for unforeseen events—it is a strategic financial tool that can considerably reduce your tax liability. If you invest in medical health insurance and a term insurance policy, you can get substantial tax deductions per Indian tax rules.

Here’s how it helps:

Annual premiums can be deducted from your income, reducing the amount you must pay in taxes.
Helps you build a habit of saving and planning for the future.
Gives you complete coverage for health emergencies and income loss situations.
Includes extra benefits like deductions for preventive health check-ups, riders for critical illnesses, and the convenience of cashless hospitalisation.

Thanks to a wide range of health insurance plans in India and the ease of buying term insurance online, taking advantage of tax benefits through insurance is now much easier.

Tax Benefits of Health Insurance Under Section 80D

Section 80D of the Income Tax Act provides deductions for premiums paid on health insurance policies for self, spouse, dependent children, and parents. This benefit applies regardless of whether the policy is purchased through a private insurer or a public sector company.

Eligible Deduction Limits

Insured Persons	Maximum Deduction Available
Self, spouse, and dependent children (under 60)	₹25,000
Parents (under 60 years)	₹25,000
Parents (senior citizens, 60 and above)	₹50,000
Self and parents (both senior citizens)	₹1,00,000 (₹50,000 + ₹50,000)
Preventive health check-ups (within above limit)	Up to ₹5,000

For example, if you’re paying ₹25,000 for your own medical insurance and ₹50,000 for your senior citizen parents’ health insurance, you’re eligible to claim a total deduction of ₹75,000.

Tax Deductions on Term Insurance Under Section 80C

While health insurance offers medical coverage, term insurance provides a pure life cover for the policyholder. It’s one of the most cost-effective ways to secure your family’s financial future in case of an untimely demise.

What You Can Claim Under Section 80C?

The premium paid for a term insurance policy qualifies for deductions under Section 80C, up to a maximum of ₹1,50,000 per financial year. However, to be eligible:

The annual premium must not exceed 10% of the sum assured (for policies issued after 1 April 2012)
If it does, only the portion up to 10% qualifies for deduction

This provision not only encourages individuals to invest in long-term protection but also rewards them with tax savings. The death benefit received by the nominee is also tax-exempt under Section 10(10D), provided certain conditions are met.

Pro Tips for Maximising Your Tax Benefits with Insurance

To make the most of Sections 80C and 80D, consider these tips:

Start Early: Early investment means smaller premiums and longer coverage.
Cover All Eligible Dependents: Include parents and children to maximise 80D deductions.
Review Annually: Your health or income situation may change. Keep your policies updated.
Claim Preventive Deductions: Remember the ₹5,000 deduction for health check-ups.
Combine Plans Smartly: Use a mix of medical insurance for healthcare needs and term insurance for income protection.

To sum up, insurance does more than just offer financial protection—it is a key part of tax-efficient financial planning. By investing in the right health insurance and term insurance products, you can enjoy significant deductions under Section 80D and Section 80C respectively.

Incorporating both types of insurance into your portfolio is not just smart planning—it’s strategic tax optimisation. So, whether you’re looking to protect your family, manage medical expenses, or simply make tax season a little less daunting, now is the right time to evaluate your insurance needs.

Choose wisely, save smartly.

Author Profile

Adam Regan: Deputy Editor

Features and account management. 3 years media experience. Previously covered features for online and print editions.

Email Adam@MarkMeets.com