Health Insurance + NPS + HRA: The Ultimate Combo Explained
- PRITI SIRDESHMUKH
- Sep 24
- 8 min read
Updated: Sep 29
Tax planning is a crucial aspect for salaried individuals and professionals to reduce taxable income legally while maximising savings. Key avenues like health insurance deductions, National Pension Scheme (NPS) contributions, and House Rent Allowance (HRA) exemptions offer substantial relief under the Income Tax Act. However, navigating these benefits requires understanding how they apply under the old and new tax regimes. With recent updates for FY 2024–25, knowing which deductions are allowed, how to calculate them, and how to combine them effectively can significantly reduce your tax liability. This guide explores these deductions in detail and provides practical steps for claiming them efficiently. Platforms like TaxBuddy can simplify the process, ensuring accurate filing and proper documentation, helping you save time and avoid errors.
Table of Contents
How Health Insurance Deductions Work in the Old Tax Regime
Under Section 80D, taxpayers can claim deductions for premiums paid towards health insurance for themselves, family members, and senior citizen parents. For FY 2024–25, an individual can claim up to ₹25,000 for insurance premiums for self, spouse, and dependent children, with an additional ₹25,000 if covering parents below 60 years of age, or ₹50,000 if parents are senior citizens. Preventive health check-ups up to ₹5,000 are included within this limit. The old tax regime allows these deductions in addition to other exemptions, making it a favorable option for maximizing tax savings.
Is Health Insurance Allowed in New Tax Regime?
The new tax regime simplifies tax slabs but does not allow most deductions and exemptions, including standard deductions for health insurance premiums. This means Section 80D benefits are not applicable if opting for the new regime. Taxpayers need to evaluate whether retaining the old regime for claiming health insurance, along with other deductions, results in lower overall tax liability.
NPS: Tax Benefits and Latest Updates
Investments in the National Pension Scheme (NPS) offer dual tax benefits. Under Section 80CCD(1B), additional contributions up to ₹50,000 can be claimed over the standard 80C limit of ₹1,50,000. This limit is available in the old regime, reducing taxable income directly. NPS contributions under Section 80CCD(2) by employers are also tax-exempt up to 10% of salary. For FY 2024–25, these benefits remain unchanged, and NPS continues to be a powerful tool for retirement planning while availing tax savings.
HRA: Maximizing House Rent Allowance Exemptions
House Rent Allowance (HRA) is a common salary component that provides tax benefits under Section 10(13A). The exemption is calculated as the least of three amounts: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary for metro cities (40% for non-metro cities). Proper documentation such as rent receipts or a rent agreement is mandatory. Accurate calculation can significantly reduce taxable income for salaried individuals paying rent.
Is HRA Exemption Available in New Tax Regime?
The new tax regime does not allow exemptions on HRA. Taxpayers choosing this regime must forgo HRA benefits, which may increase tax liability if the HRA component is substantial. This makes it essential to compare total tax payable under both regimes before making a choice.
The Ultimate Combo: Health Insurance + NPS + HRA for Maximum Tax Savings
Combining health insurance deductions, NPS contributions, and House Rent Allowance (HRA) exemptions under the old tax regime provides one of the most effective strategies for maximizing tax savings. Each of these deductions operates under separate sections of the Income Tax Act, allowing taxpayers to reduce their taxable income cumulatively, rather than being restricted to a single deduction. Health insurance premiums paid for oneself, spouse, children, and even parents are eligible for deduction under Section 80D, offering relief from the tax burden while ensuring financial protection against medical emergencies.
In addition, contributions to the National Pension System (NPS) under Section 80CCD(1B) allow further tax savings up to ₹50,000 beyond the 80C limit, helping individuals plan for long-term retirement while simultaneously reducing taxable income. House Rent Allowance (HRA), claimed under Section 10(13A), provides relief for salaried employees paying rent, especially in metro cities where rental costs are high. By strategically combining these three provisions, salaried individuals with higher basic salaries can significantly lower their overall tax liability, often achieving savings that are not available under the new tax regime, which prioritizes simplicity and lower rates but limits exemptions.
This approach is particularly beneficial for taxpayers who reside in high-rent areas and actively contribute to health and retirement schemes, as it allows leveraging multiple tax benefits simultaneously, optimizing both short-term savings and long-term financial security.
Practical Steps to Claim Health Insurance, NPS, and HRA Deductions
To claim deductions for health insurance, NPS, and HRA accurately, start by gathering all relevant documents. For health insurance, this includes receipts for premiums paid on policies covering yourself, your spouse, children, and dependent parents. Additionally, include receipts for preventive health check-ups, if any, as these also qualify for deductions under Section 80D. Ensuring that all receipts are valid and correctly reflect the payment dates is essential for a smooth filing process.
Next, collect all rent receipts and validate your rent agreement to claim House Rent Allowance (HRA). Make sure the rent receipts include the landlord’s details, payment dates, and amounts paid. If the landlord receives more than a certain threshold, their PAN may also be required to avoid discrepancies during verification. Accurately calculate your HRA exemption using the prescribed formula based on salary, rent paid, and city of residence.
For contributions to the National Pension Scheme (NPS), gather proof of deposits made during the financial year. Ensure that the total contributions do not exceed the limits set under Section 80CCD(1B) and 80C.
Once all the documents are ready, carefully fill in these details in your Income Tax Return. Cross-check the amounts with Form 16, bank statements, and receipts to avoid mismatches that could delay processing or trigger notices from the Income Tax Department.
Using a reliable platform like TaxBuddy can simplify this entire process. TaxBuddy automatically pre-fills data from Form 16, calculates deductions for health insurance, NPS, and HRA, and tracks your entries to ensure accuracy. It reduces the chances of errors, helps you claim the maximum eligible deductions, and provides a seamless filing experience with minimal manual effort.
Common Mistakes to Avoid When Claiming These Benefits
When claiming tax benefits under various sections like HRA, 80C, 80D, and others, taxpayers often make avoidable mistakes that can lead to reduced exemptions, notices from the Income Tax Department, or even penalties. One of the most common errors is claiming House Rent Allowance (HRA) without submitting valid rent receipts. Taxpayers must ensure that rent receipts are accurate, reflect the correct amount paid, and include the landlord's details to validate the claim.
Another frequent mistake is exceeding the eligible limit for health insurance premiums under Section 80D. Taxpayers sometimes include premiums for family members or policies not eligible for deduction, leading to disallowed claims. It is important to calculate the premiums correctly, considering the applicable limits for self, spouse, children, and senior citizen parents.
Forgetting to include employer contributions to the National Pension Scheme (NPS) under Section 80CCD(2) is another oversight. Since these contributions are eligible for deductions over and above Section 80C limits, excluding them can result in higher taxable income.
Lastly, filing your return without cross-verifying income, deductions, and TDS details with Form 16, bank statements, or other financial documents is a critical mistake. Mismatches or omissions can trigger scrutiny, delay refunds, or generate notices from the Income Tax Department. Careful reconciliation ensures accurate filing and minimizes the risk of errors or subsequent notices.
Case Example: Combining Health Insurance, NPS, and HRA for Tax Efficiency
Consider a salaried individual with a basic salary of ₹12 lakh annually, paying ₹3 lakh in rent, contributing ₹50,000 to NPS, and paying ₹30,000 in health insurance premiums. Using the old regime: HRA exemption = ₹2,00,000, NPS deduction = ₹50,000, Health insurance deduction = ₹30,000. Total deductions = ₹2,80,000, effectively reducing taxable income and maximizing tax efficiency.
TaxBuddy: Simplifying Documentation and Filing
TaxBuddy provides a seamless experience to claim these benefits. The platform allows easy uploading of receipts, auto-calculation of eligible deductions, and ensures proper documentation for health insurance, NPS, and HRA claims. Its AI-driven tools guide taxpayers step by step, minimizing errors and ensuring smooth filing, even for those unfamiliar with complex calculations.
Conclusion
Maximizing tax benefits through health insurance, NPS, and HRA requires careful planning and accurate documentation. While the old regime allows these deductions, the new regime offers simplicity but fewer exemptions. Platforms like TaxBuddy can simplify the process, automate calculations, and ensure error-free filing. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides both self-filing and expert-assisted plans to cater to different taxpayer needs. The self-filing option is ideal for individuals comfortable navigating ITR utilities and JSON uploads, offering step-by-step guidance and pre-filled forms. The expert-assisted plan, on the other hand, ensures a tax professional reviews your return, verifies calculations, and handles complex scenarios like multiple income sources or audit requirements, providing an added layer of accuracy and compliance.
Q2. Which is the best site to file ITR?
TaxBuddy is a secure, intuitive, and reliable platform for online ITR filing. It combines AI-driven automation with professional guidance, enabling accurate calculations, smooth form filling, and hassle-free e-verification. With pre-filled utilities, JSON file support, and instant tracking of refund status, TaxBuddy offers a comprehensive filing experience compared to generic portals.
Q3. Where to file an income tax return?
Income Tax Returns can be filed through the Income Tax Department’s e-filing portal or through authorized platforms like TaxBuddy. TaxBuddy allows you to upload Form 16, pre-filled JSON files, or enter details manually, ensuring seamless filing and verification. Both web and mobile platforms are supported for ease of access.
Q4. Can I claim HRA if I live in a metro city and pay high rent?
Yes, HRA exemption can be claimed based on your rent payments, salary structure, and city of residence. For metro cities, the exemption limit is calculated considering actual rent paid minus 10% of basic salary, 50% of basic salary for metro residents, or actual HRA received—whichever is lower. TaxBuddy simplifies this calculation automatically during filing.
Q5. Are NPS contributions by my employer fully tax-exempt?
Employer contributions to the National Pension System (NPS) are eligible for tax exemption under Section 80CCD(2), up to 10% of salary. Any additional contributions beyond this limit are not exempt. TaxBuddy accurately calculates eligible exemptions while preparing your ITR.
Q6. How much can I claim under Section 80D for health insurance premiums?
Under Section 80D, an individual can claim up to ₹25,000 per year for health insurance premiums for self, spouse, and children, and an additional ₹25,000 for parents below 60 years (₹50,000 if parents are senior citizens). TaxBuddy ensures these limits are applied correctly when claiming deductions.
Q7. Can preventive health check-ups be included in Section 80D deductions?
Yes, preventive health check-up expenses up to ₹5,000 are included within the Section 80D deduction limits. TaxBuddy allows you to input these expenses alongside insurance premiums for accurate computation of your total deduction.
Q8. Is HRA exemption allowed under the new tax regime?
No, under the new tax regime, most exemptions including HRA, standard deduction, and other allowances are not available. TaxBuddy clearly differentiates between old and new regimes, ensuring users understand applicable exemptions before filing.
Q9. Can I combine health insurance, NPS, and HRA deductions for maximum savings?
Yes, taxpayers can combine multiple deductions such as Section 80D (health insurance), 80CCD(1/2) (NPS contributions), and HRA exemption under the old tax regime to optimize tax savings. TaxBuddy automatically consolidates these deductions to compute maximum eligible relief.
Q10. What documents are needed to claim HRA?
To claim HRA, you need rent receipts, your landlord’s PAN (if rent exceeds ₹1 lakh per year), salary slips showing HRA received, and the rental agreement. TaxBuddy allows easy upload of these documents and validates entries to ensure smooth exemption claims.
Q11. Does TaxBuddy verify all uploaded receipts for deductions?
Yes, TaxBuddy verifies uploaded receipts, bills, and supporting documents for all claimed deductions such as HRA, 80D, or charitable contributions. This ensures accuracy, compliance, and reduces the risk of notices from the Income Tax Department.
Q12. Can I switch between old and new tax regimes during filing?
Yes, taxpayers can choose between the old and new tax regimes during filing. The choice affects which exemptions and deductions are applicable. TaxBuddy provides clear comparisons and guides users to select the regime that results in optimal tax savings based on their income and deductions.
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