Medical emergencies can happen anytime. With our sedentary lifestyles, unhealthy eating habits, and stressful lives, diseases and ailments can bring us down suddenly. While advancements in medical science have made treatments and cures available to us, the costs of these treatments are rising every year, making it difficult for people to manage.
Hence, a health insurance policy is a necessity in today’s times. In fact, the Indian Government also acknowledged the importance of health insurance and has offered tax benefits under Section 80D of the Income Tax Act, 1961, for people paying health insurance premiums. In this article, we will talk about the tax benefits offered by medical policies.
When you buy a health insurance policy, the insurer offers coverage for the costs incurred by you for any medical treatments(as covered in the policy). These include pre and post-hospitalisation costs too. Health insurance policies are available at an annual premium based on the coverage sought by you.
Tax benefits Under Section 80D of the Income Tax Act, 1961
The government offers a tax deduction on the premium paid for health insurance plans to individuals under Section 80D of the Income Tax Act, 1961. Here are some rebates under 80D:
- An individual paying medical policy premiums for self, spouse, and/or children can claim a maximum tax deduction of ₹25,000 per year.
- For senior citizens, the deduction limit is ₹50,000 per year
- If an individual purchases a health insurance policy for their parents, then:
- For parents < 60 years of age: Maximum annual tax deduction limit is ₹25,000
- For parents > 60 years of age (senior citizens): Maximum annual tax deduction limit is ₹50,000
- Individuals can claim an additional tax deduction of ₹5000 for expenses related to the health checkups of their entire family.
Exclusions Under Section 80D
- You cannot claim tax benefits for health insurance premiums paid for siblings, working children, or grandparents.
- Tax deduction under Section 80D will not be available if the premium is paid via cash. However, you can claim the tax deduction of ₹5000 for health checkups even if you have paid in cash for the same.
- Employees cannot claim tax benefits for group health insurance plans where the company pays the premium. However, if an employee chooses add-on covers to boost the coverage, then the additional amount paid by them qualifies for tax deductions.
The Total Tax Benefit That You Can Get
- If you have purchased a health insurance policy for yourself, your spouse, children, or all, then you can claim a maximum tax deduction of ₹30,000 per year. This includes the ₹5000 towards health checkups.
- In addition to the above policy, if you include your parents (below 60 years of age), then the total tax benefit will increase to ₹55,000 (₹30,000 for self + spouse + children & ₹25,000 for parents below the age of 60 years)
- If your parents are senior citizens (above the age of 60 years), then the total tax benefits will increase to ₹80,000 (₹30,000 for self + spouse + children & ₹50,000 for parents above the age of 60 years)
- If you are a senior citizen yourself and buy an insurance policy that includes your spouse, unemployed children, and parents, then the total tax benefits you can claim will be ₹1.05 lakhs (₹30,000 for self + spouse + children, an additional ₹25,000 since you are a senior citizen & ₹50,000 for parents above the age of 60 years)
The Double Benefit of Health Insurance
A health insurance policy ensures that any medical expenses incurred by you and your family are covered by the insurer. Hence, you can avail of the best treatment for your loved ones without having to worry about the costs. Considering the high costs of medical treatments in India, this benefit alone is sufficient to buy a health insurance policy.
With the government offering health insurance tax benefits under 80D on the premium paid towards a health insurance policy, you can reduce your taxable income and save on the additional tax that you would have to pay.
Hence, buying a medical policy offers the dual benefit of saving on medical costs and tax.
You work hard to earn and save money. However, a medical exigency can wipe out years of savings and even put you under a loan. With the right cashless health insurance policy, you can save your hard-earned money. Although the insurance policy has a premium payment, the tax benefits of health insurance in Income Tax make it a more cost-effective option. Hence, if you have not yet purchased a health insurance policy, then it might be time to start considering buying one.