Any financial planner you meet will have different suggestions to offer you. However, there is always something in common with all of them. For example, most of them will tell you to save money for paying taxes or consider tax saving options. At the same time, they will also advise you to keep yourself safe from any unfortunate issues that might arise like urgent medical needs. The one option that allows you to do both of these things is a health insurance policy.
Unaware of the tax saving benefits of health insurance, the first idea many people have is to find a good health plan and some good tax saving options separately. At its most basic workings, health insurance is a financial tool that can help you with your medical bills. This gives many people the impression that health insurance is just a safety net for if you ever get sick. But a health policy with tax benefits can be very beneficial.
The premium you pay for health insurance qualifies you for tax benefits. Here’s a look into how a health insurance policy can serve as a tax saving option for you:
The Income Tax Act in the Constitution of India has served as a handbook for all matters relating to taxation. When it comes to health insurance, the part you need to be aware of is Section 80D. Under Section 80D, the premium you pay for health insurance policies qualifies you for an income tax deduction. This benefit can also be availed by those who have health insurance for their spouse, children, parents, and other dependents.
The deduction you can claim as a tax benefit depends on the age of the people specified in the policy. For example, if you pay premiums for medical coverage for yourself, your spouse, children and your parents, the maximum deduction you can claim is ₹ 25,000 per year. However, this only applies if all the policy members are under 60 years of age.
If you have a parent over the age of 60 who is included in your health coverage, you can claim a maximum deduction of ₹ 50,000 per year. Hence, it is better to include you parents in your policy instead of browsing through options of health insurance for senior citizens. Moreover, if you are under 60 and your parents are above 60, you can claim a tax benefit of up to a maximum of ₹ 75,000. If both you and your parents are over 60, your health insurance premium will qualify you for a maximum tax benefit of ₹ 1,00,000.
In addition, Section 80D allows you to claim a tax deduction for preventive health checks. While this does not increase the total limit of tax deduction you can claim, you can get a tax deduction of ₹ 5,000 per person preventive health checks. This section 80D medical expenditure deduction is an effort by the government to promote a ‘precaution over cure’ approach among citizens.
All types of health insurance plans make you eligible for tax benefits. There is a popular misconception that only plans such as individual health policies and family floater health plans make you eligible for tax deduction. However, defined benefit plans such as the daily hospital cash policy or the critical illness policy may offer the same benefits.
You must also note that tax benefit is subject to change in tax laws.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.