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How can you save tax by insuring your parents?

One of the first and most important steps for financial planning is to have a health insurance. Health Insurance Policy comes with the additional advantage of tax benefit. Regular health Insurance plan will cover you, your spouse and children. Tax benefit could be further extended by purchasing health insurance for your parents. This is a much-needed benefit for them that will give you some more tax savings and is a win-win situation for everyone.

Income Tax Act and parental Insurance

As per Indian Tax Act, there are provisions made to save tax by individuals if they have incurred expenditure to buy health insurance for self, family and close relatives like parents. Based on the requirement, different types of insurance policy can be taken. For dependent parents, the tax benefit for health insurance premium payment is covered under Section 80D.

Need for insuring your parents

If a person has floater insurance from his/her employer, that covers the parents as well, in most cases additional insurance for parents is not taken. In case they fall critically ill and not enough coverage is existing, then you have to incur a big expense out of your pocket. Though parental insurance comes with a higher premium, it comes with certain brownie points of a tax deduction for you.

Tax deduction benefits of parental insurance

Keeping the increasing cost of medical expenses, in 2017-18 budget the allowable deduction is increased to 25,000 for non-senior citizens and 30,000 for senior citizens. If either parent is 60 years old, you can get the tax deduction benefit of 30,000.

Within this limit, up to ₹5000 can be used for the health check-up of your parents. This is as per section 80D and is added to your own health insurance premium.

You can claim Tax deduction benefits for your parents’ insurance only if the premium is paid through banking channels like net banking, debit or credit cards, cheques and demand drafts. The exception is preventive health check-up, for which payment could be made with cash.

An illustrative example of parents’ health insurance premium versus tax deduction is given below. This justifies the rationale and importance of getting health insurance for elderly parents.

If health insurance annual premium paid by you is ₹26000 for your senior parents and you spent ₹8000 for their preventive health check-up, then total spent on their health insurance and check-up combined for the year is ₹34000. Parents being senior citizens, enables you to have a tax deduction of up to ₹30000 for the year. Eventually, by spending ₹4000 (i.e., the difference of ₹34000 minus ₹30000), you are ensuring a health plan for your parents which will come handy in case any critical health issue related emergency arise for them.

Additionally, section 80D of Tax Act also kept provision for some more tax deductions for very senior citizens. People above 80 years are considered very senior citizens. This tax claim is specifically for medical treatment of those old citizens who are not covered under any insurance. It has been proposed that any medical expenditure payment made for a very senior citizen will be tax exempted under 80D. The maximum allowable limit for this will be ₹30,000.

In this context, if one parent is above 80 years and uninsured and another parent is a senior citizen (below 80) then the maximum tax benefit that you can claim is ₹30,000 and this might include medical treatments, check-ups and insurance (if any) of both the parents combined.

Tax benefit for treatment of special illnesses

Under Section 80DDB of Indian Income Tax Act, you will get the deduction of up to ₹60,000 for senior parents and up to ₹80,000 for very senior parents for the expenditure done for treatment of certain ailments like chronic renal failure, a group of specified neurological disorders, malignant cancer, certain specified haematological disorders, full-blown AIDS and so on. The complete list of such illnesses covered under this section is given under Rule 11DD.

Tax Benefit for disability

Though this is not specific for parents or elderly citizens, but applicable to your parents if they have a disability. In that case, you are entitled to claiming a deduction of up to ₹75,000 or up to ₹1.25 Lakh for severe disability. The claim is for the expenditure for medical treatment, nursing and maintenance of the person, and rehabilitation. This claim, however, needs a medical certificate of eligibility.


The tax benefit for special illnesses and disability are not dependent on health insurance. However, for other cases, it is beneficial for you to get an appropriate health insurance for your parents and enjoy some tax benefit.

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