Saturday, July 13

Taxation Facts about Health Insurance Policies You Should Know

Medical emergencies can arrive unannounced and strip you of years of savings and even put you under a loan if you don’t have a health insurance policy. In recent years, there has been a sharp increase in the costs of medical treatments and a health insurance plan has become a necessity. 

Also, most of us live sedentary lives and have unhealthy eating habits that expose us to various lifestyle-related ailments. With a health insurance plan, you can be assured of the insurer taking care of the costs of medical treatment. 

You can go online and compare health insurance plans to find the one that is best suited to your requirements. In fact, the Indian Government also offers tax benefits to people paying health insurance premiums under Section 80D of the Income Tax Act, 1961. In this article, we will talk about health insurance tax benefits in detail.

Under the Income Tax Act, 1961, the government offers a tax deduction for the amount paid as a health insurance premium under Section 80D. Let’s take a quick look at the section.

Understanding Section 80D of the Income Tax Act, 1961

The tax authorities allow a deduction of the premium paid for health insurance plans to individuals and HUFs (Hindu Undivided Family). The premium amount can be deducted from the annual income for computing the income tax liability of the individual/HUF. You can also claim a deduction for top-up plans and any additional riders/add-ons purchased by you. 

Further, this section allows you to deduct the premium paid for health insurance plans for your spouse, dependent children and parents too. Hence, you get the coverage for medical emergencies in the future plus tax benefits for ensuring that your family receives the best medical attention without burning a hole in your pocket.

Who Can Claim Tax Benefits?

Only individuals and HUFs are allowed to claim a health insurance tax deduction under Section 80D. All other entities including organisations are not eligible for the same. Further, you can claim tax deductions for premiums paid on health insurance policies for yourself, your spouse, dependent children and parents. The tax deduction cannot be claimed for policies for your siblings, working children, or grandparents.

Types Of Payments That Are Eligible for a Tax Deduction

An individual or HUF can claim tax deductions for the following payments:

  • Premiums paid for a health insurance plan for self, spouse, dependent children and parents
  • Expenses incurred for preventive health checkups
  • The contribution made to any government-driven health schemes
  • Expenses incurred for the treatment of a senior citizen who is not covered under any insurance policy

What are the Limits of Deductions Allowed?

Is health insurance tax deductible? Here is the answer.

Below is a quick look at the various limits for deductions under Section 80D:

Scenario Premiums Paid (In Rs.) Deductions under Section 80D (in ₹)
Self, Spouse, and children Parents
Your parents are less than 60 years old ₹25000 ₹25000 ₹50000
You and your spouse are less than 60 years old, but your parents are above 60 years of age ₹25000 ₹50000 ₹75000
You, your spouse, and your parents are all above 60 years of age ₹50000 ₹50000 ₹100000
Individuals in a HUF ₹25000 ₹25000 ₹50000
Non-Resident Indians ₹25000 ₹25000 ₹50000

Additionally, you can claim a health insurance deduction in Income Tax to the amount of ₹5000 every year towards expenses for the annual health checkup of your family.

Do You Need a Health Insurance Policy?

A health insurance policy is the perfect instrument to protect your finances against rising medical costs. If you choose a reputed and reliable insurer and select a plan based on the needs of your family, you can get most of the medical treatments done at no cost to you. Also with tax deductions under Section 80D, you can enjoy health insurance tax benefits on the amount paid towards the policy. This makes it a win-win proposition for you.

Summing Up

When you decide to buy a health insurance policy, the first thing you need to think of is if you want a policy for yourself alone or if you want a family insurance plan. Next, think about the coverage you need and if there are any specific illnesses or diseases that you want coverage from. With this information ready, start looking for a health insurance plan. You can use the health insurance premium calculator to get health insurance quotes. 

Compare providers and plans, look at coverage and reviews, claim settlement ratios, range of network hospitals, and premiums before signing the dotted line. Remember, a health insurance plan offers the dual benefit of saving medical costs and taxes. Ensure that you choose the right one and enjoy these benefits. Good Luck!