Health Insurance Premiums and Tax Deductions: Myths vs Facts

When it comes to health insurance and tax savings, the conversation often gets clouded by myths, half-truths and assumptions. Many individuals and families miss out on meaningful savings simply because they aren’t clear about how health insurance premiums relate to income tax deductions. Worse still, misconceptions lead to poor financial planning or underinsurance — especially for those who need coverage the most, such as senior citizens or families with dependants.
The good news is that tax relief through health insurance premiums is not only legally supported under Section 80D of the Income Tax Act but also quite flexible when structured properly. This article sets the record straight by busting some of the common myths and laying out the facts around health insurance and tax planning.
Whether you’re looking at the best health insurance for senior citizens in India or exploring the best health insurance plans in India for your family, understanding the truth behind tax deductions can save you money — and offer better coverage in the long run.

Myth 1: Only the Policyholder Can Claim the Tax Deduction
Fact: One of the biggest misunderstandings is that only the person who is insured can claim a deduction. In reality, the person who pays the premium is eligible for the deduction, not necessarily the one insured under the policy.
For example, if a working son pays the premium for his retired parents’ health policy, he can claim a deduction — provided the payment is made in a non-cash mode and the policy is in their names. The son may not be covered under the same policy at all, but his contribution still qualifies under Section 80D.
This becomes particularly relevant when arranging cover for ageing parents. The deduction for premiums paid for senior citizen parents goes up to ₹50,000 — making it one of the most generous tax benefits of health insurance available to individuals today.

Myth 2: All Medical Expenses Are Deductible
Fact: It’s commonly assumed that any medical expense — whether it's a surgery, doctor visit or diagnostic test — is tax-deductible. This isn’t true. Only insurance premiums qualify under Section 80D, and only if paid via non-cash methods like cheque, UPI or net banking.
There is, however, one exception: preventive health check-ups. You can claim up to ₹5,000 per year within the overall Section 80D limits for these, even if you paid in cash. Still, the larger deductions come from premium payments. So, choosing comprehensive plans — such as the best health insurance plans in India — ensures that you're not only well protected but also gaining maximum tax relief.
Medical reimbursements, over-the-counter medicines, or routine consultations without insurance do not qualify, no matter how essential they may be.

Myth 3: Senior Citizens Can’t Get Health Insurance, So No Tax Benefits Apply
Fact: It’s a common belief that insurers are reluctant to cover older individuals, and as a result, there's no point in seeking deductions for them. This is outdated thinking. In fact, most insurers today offer dedicated products for seniors, some with entry ages going up to 75 or even 80.
Buying a policy for parents who are over 60 not only provides them with financial protection but also entitles you to a tax deduction of up to ₹50,000 under Section 80D. This can be claimed whether you buy a separate policy or a joint one for both parents.
If you're a retiree yourself and purchasing a policy for your own coverage, you too can claim this deduction. That’s why it’s vital to explore the best health insurance for senior citizens in India, not just for peace of mind, but for efficient tax planning as well.

Myth 4: You Get a Flat Deduction Regardless of Who’s Covered
Fact: The amount you can claim varies based on who is covered and their age. Section 80D allows different limits depending on whether the insured person is below or above 60, and whether they’re your parent or part of your immediate family.
Here's a simplified breakdown:
₹25,000 for self, spouse and dependent children (all under 60)
₹50,000 for self/spouse if you are above 60
₹25,000 additional for parents (below 60)
₹50,000 additional for senior citizen parents (60 or older)
This layered benefit means families can claim up to ₹1,00,000 in deductions annually. To unlock this, it’s essential to structure your policy portfolio wisely — and that includes selecting from the best health insurance plans in India based on your family’s unique needs.

Myth 5: You Can Only Claim One Policy
Fact: There’s no restriction on the number of policies you hold or claim deductions for — as long as they fall within the permitted limits of Section 80D. For instance, you might have:
A family floater plan for yourself, spouse, and children
A separate policy for your senior citizen father
A top-up plan for higher coverage

Each of these can be used to claim deductions, provided the aggregate doesn’t exceed the category limit (₹25,000 or ₹50,000, depending on age and relation). So, spreading out your insurance coverage can not only offer more protection but also maximise the tax benefits of health insurance available to you.

Myth 6: Waiting Until March Is Fine for Tax-Saving Insurance
Fact: Leaving health insurance decisions to the last minute in March is a risky move — and often a costly one. Senior citizen policies may involve medical tests or underwriting reviews. Some policies might have cooling-off periods before certain benefits begin.
Buying in a hurry can also lead to poor product choices, low coverage, or missed benefits. To avoid this, it’s best to plan your insurance purchases at the start of the financial year. This way, you have time to assess the best health insurance plans in India, compare features, and secure your deduction without stress.

Myth 7: Health Insurance for Parents Doesn’t Help Me Save Taxes
Fact: If you’re financially supporting your parents, their health insurance premiums are deductible from your taxable income — even if they’re not dependants in the legal sense. What matters is that you are paying the premium.
Given the ₹50,000 deduction limit for senior citizen parents, it makes financial sense to cover them separately. Some of the best health insurance for senior citizens in India offer shorter waiting periods, OPD benefits and cashless treatment — all of which enhance both convenience and coverage.
So not only are you securing their health, but you’re also reducing your tax liability in the process.

In Conclusion
Clearing up these myths is the first step to making health insurance work harder for you — not just in providing financial protection, but also in easing your tax burden. From ensuring your parents are covered to using top-up plans wisely, there are numerous strategies to make the most of tax benefits of health insurance.
Choosing the right policy is crucial to this process. That’s why more individuals and families are turning to Niva Bupa, a provider known for offering some of the best health insurance plans in India. Whether you're buying for your family, your parents, or yourself in your senior years, Niva Bupa’s solutions are designed with real life in mind — combining comprehensive cover with ease of claim and solid tax efficiency.
So, whether it’s financial planning or family wellness, the truth is clear — when chosen wisely, your health insurance is an investment that pays off in more ways than one.