Within prescribed limits, your premium payment becomes non-taxable and your annual income is adjusted by that to calculate taxable income and tax liability.
Under Indian Income Tax Act of 1961, several sections are attributed to defining scope and extent of income tax rebates.
Section 80D of Income Tax Act 1961, offers deduction on health insurance policies which is additional to INR 150,000 exemption provided under Section 80 C.
Individuals can avail this benefit for policies for self, spouse or children. In case of HUF, it’s applicable for entire family.
As per Section 80D, premium paid for health insurance policies is exempt from tax deduction.
Extent of this benefit is INR 25,000 in year, unless policyholder is senior citizen. In such cases, exemption limit is INR 50,000.