Health insurance is a financial policy that protects you and your family during medical emergencies. It is important as it offers coverage of medical expenses, pre-post hospitalization charges, domiciliary expenses, doctor consultation fees, medical bills, and tax benefits. It is a primary investment made by any individual to overcome the strain during any medical emergency. They help you save from a big financial crisis during a serious illness. One of the most attractive advantages of health insurance is that it offers tax benefits also.
Health plans are a bonus as they not only provide full medical coverage in a medical emergency but also serve as an effective tax-saving tool. On the health insurance plans the policyholders under the Income Tax Act, Section 80D, of 1961 get a profit from tax deductions.
Types of Health Insurance Plans
Various types of insurance companies provided health plans.
1. Cancer Insurance Plans
It is an insurance policy specially designed to provide you with financial protection against various stages of cancer. These insurance plans charge you an extra amount on premiums but you will be tension free regarding your cancer treatment. It’s good for those who have a genetic history of cancer.
2. Critical Illness Plans
Provide financial aid for the treatment of serious ailments like kidney, liver, heart attacks, paralysis, and more. Many insurance plans provide riders cover critical illnesses. You need to pay some extra amount on premiums to buy the rider.
3. Individual Health Insurance Plans
It is a basic health insurance plan that covers an individual’s health and provides the assured sum as per the contract. These plans are the best for people who are at higher risk of illness. These plans also accept more than 1 claim per year as they cover only a single person.
4. Family Insurance Plans
These health insurance plans offer coverage for the entire family under a single policy. These policies cover the whole family under a single sum assured. Many family insurance plans allow you, your spouse, and your children under the coverage of the plan while others include the parents also.
5. Personal Accident Insurance Plans
Personal accident insurance plans offer coverage to you for death, temporary or permanent disability, or any injury caused due to the accident. You will get monetary compensation in case of body injuries, death, and disability due to an accident.
Benefits Of Health Insurance
There are many benefits of life insurance listed below:
- Health insurance covers future medical emergencies which in turn would have depleted your savings or would have impacted your family’s financial future.
- Medical costs are increasing at an alarming rate and for a middle-class person, it would be difficult to afford such high medical bills.
- Cashless treatment at nearby hospitals and reimbursements are also by insurance companies.
- Health insurance keeps you and your family at peace and stress-free as you have to pay only some part of the premium and not even that in cashless treatment.
- Health insurance tax benefit under Section 80D is a major incentive, with it every person can take advantage of tax savings.
Tax Benefits In Health Insurance
Under section 80D of the Indian income tax act 1961, an Individual can claim a deduction from taxable income. A person can claim a deduction for the health insurance premium amount paid and expenses incurred toward preventive health checkups. The exemption limit varies from 50,000 to 75,000 in the case of a senior citizen.
Hindu Undivided Family and Non-Resident Indians can also get tax benefits from health insurance plans. Health insurance tax benefit under 80D is enhances the awareness among people about the health insurance need because the public is usually doubtful about health insurance tax deductibles and benefits.
Income Tax Deduction from the Health Insurance
- The deduction limit in health insurance depends on the policyholder’s age.
- The tax deduction in health insurance can claim on various plans provided by the company may it be for individuals or a complete family plan.
- The maximum of Rs.25000 is the medical deduction limit for the policyholder of age 60 or less.
- And the deduction limit of Rs.50.000 is for senior citizens (Aged 60 and above).
- Hindu Undivided families are allowed to claim a maximum deduction of Rs.25,000 at ages below 60 years and Rs50,000 above 60 years.
- Non-Resident Indians are allowed the maximum deduction of ₹25,000 if they hold an insurance policy in India.
- The Preventive Health Checkup allowance is available only when don’t claim the above-mention deduction limit.
- Health insurance tax benefits offer Preventive health check-ups also. You can claim a tax deduction on PHCs of up to Rs5,000 p.a. for parents age 60 and below, and Rs7000 for those above 60.
Claiming Health Insurance Tax Benefits Under Section 80D
- If you pay your health insurance premium in cash you cannot avail of tax benefits in health insurance. To qualify for tax deductions on health insurance under Section 80D on the premium paid. The modes of payment should be online such as cheques, bank drafts, or credit or debit cards.
- But for your preventive health check-up, you can pay in cash and still qualify for a health insurance tax benefit deduction.
- Since claiming Tax benefits in health insurance is a yearly process, you might have assumed that it won’t be liable on the multiyear policies. But the deduction is given on multi-year policies as well. It is calculated according to the policy terms
Some necessary documents are required as proof to get a deduction in tax:
- The full receipt for premiums paid.
- The date on the receipt should be within the financial year for which tax is calculated.
- The receipt should clearly show the date of the premium, the amount, and the mode of payment.
- Cash receipts for the premium payment are not acceptable.
Income Tax Saving For Senior Citizens
The following income tax deduction is given for senior citizens (60 years or older, but less than 80 years of age). under Section 80D:
- Rs.50,000 claim deduction is allowed on medical insurance premiums every financial year
- Rs.1 Lakh for medical treatment in a critical illness condition.
- Also, a tax deduction of Rs.50,000 can be claimed if a superaged father is not having insurance and the mother is also a senior citizen.
Important Points to Remember
One should keep in mind the following points to avail of the tax benefit in health insurance under section 80 D of the income tax act,1961:
- Carefully read the terms and conditions concerned with tax deductions under your health insurance policy.
- Do not pay health insurance premiums in cash which will not make you eligible for a tax deduction as per the rule in section 80 D, Income tax act,1961.
- If you buy a health insurance policy for yourself and your parents, and all of you lie in the category of a senior citizen then the maximum deduction under Section 80D that can be availed is Rs.1 Lakh.
- Benefits under Section 80D can be avail in addition to tax breaks of up to Rs.1.5 Lakh in Section 80C.
To sum up, there is no doubt that health insurance policies are one of the most effective ways of saving taxes and money from waste on medical emergencies. Every health insurance policy offers tax benefits under section 80 D, regardless of whether it belongs to the individual, his or her spouse, children, or parents.
However, whenever buying health insurance, don’t just look for higher tax benefits. But try to avail coverage for the maximum medical emergencies. So, take this step wisely and correctly where to spend the health insurance policy to avail its maximum advantage.
Health Insurance Tax Benefits: FAQs
To avail of health insurance tax benefits for senior citizens, The policy should be in his name.
Ans. Yes, either the policy should be in his name or he should be a family member of any of the policyholders who have covered him in family policy health insurance.
Do we get tax benefits in health insurance yearly despite having a multi-year policy plan?
Ans. Yes, As the income tax deduction is a yearly process you get tax benefits in health insurance according to the terms and conditions of the policy.
Is the online mode of payment necessary to get tax benefits in health insurance?
Ans. Yes, the mode of payment should be online only through credit card, debit card, cheque, or draft. Payment in cash is not liable for getting tax benefits in health insurance.
Who can apply for a tax benefit in health insurance under section 80D?
Ans. Individuals, Hindu undivided families (HUF), and Non-resident Indians (NRI) can apply for a tax benefit in health insurance.
What are the maximum limits of medical deduction in the case of senior citizens?
Ans. A max. deduction of Rs.50,000 is allowed for senior citizens of having age of over 60.