Health Insurance Tax Benefits
Accidents and illnesses strike unannounced. If you are not well prepared, medical crises can put you in deep financial troubles. Therefore, it is essential to have a health insurance policy in your portfolio. It will cover the medical expenses incurred during the stay at hospital due to an illness or an accident.
Health insurance policies come with the additional benefit of tax exemption under Section 80D of the Income Tax Act. Let us understand in detail how we can avail of this health insurance income tax benefit.
Section 80D of I-T Act
As per section 80D, a taxpayer can claim health insurance tax benefit on premium paid towards medical insurance for self, spouse, dependent parents, and dependent children.This deduction is applicable over and above the deduction allowed under Section 80C. The deduction allowed under Section 80D is INR 25,000 for individuals and HUF. It can be up to INR 1,00,000 for senior citizens. Non-resident Indian can claim a deduction of INR 25,000. The table below will help you understand it better.
|Scenario||Health insurance premium paid (INR)||Deduction under 80D (INR)|
|Individual and parents below 60 years||25,000||25,000||50,000|
|Individual and family below 60 years but parents above 60 years||25,000||50,000||75,000|
|Both individual, family and parents above 60 years||50,000||50,000||1,00,000|
An individual aged below 60 years can claim a deduction of up to INR 25,000 from the total taxable income for the premium paid for self, spouse and children.
Further, if the individual pays premium paid for health insurance of parents aged below 60, there will be an additional deduction of INR 25,000 from total taxable income, taking the total deduction to INR 50,000.
If the individual pays a premium for self, spouse, children and parents above the age of 60, the deduction will be INR 25,000 for self and INR 50,000 for parents, taking the total deduction to INR 75,000.
If the individual is aged above 60 and pays the premium for health insurance for himself, spouse and parents, the total deduction can be INR 1,00,000.
Preventive health check-up under Section 80D
In order to encourage citizens to go for regular health check-ups, the government has allowed tax benefits on payments made towards preventive health check-ups. It is a way for identifying the illness in time which helps mitigate the risk factors. You can enjoy a deduction of INR 5,000 paid for the preventive health checkup. Keep in mind that the deduction will still be within the limit of INR 25,000/INR 50,000. You cannot claim deduction of any amount beyond the 80D limit.
It can be claimed for yourself, your spouse, children or parents. The payment mode can be cash too. Let us look at an example below.
You pay a premium on health insurance of INR 22,000 for the coverage of yourself, your wife and your children. Additionally, you get a health check-up done and paid INR 5,000. You can claim a total deduction of INR 25,000 under Mediclaim 80D. In this case, you will be able to claim a deduction of INR 22,000 towards the premium paid and INR 3,000 towards the health check-up. The total deduction in this case under Section 80D is INR 25,000.
Single premium policies
There is a provision to claim a deduction for a payment made towards the single health insurance premium policies. When you make a lump sum payment in a year for the policy that is valid for more than one year, it is possible to claim a deduction that is proportionate to the amount of premium applicable for the year.
You can arrive at the appropriate fraction by dividing the amount by the number of policy years. But it will still remain under the limits of INR 25,000 and INR 50,000.
Key points to remember while claiming the deduction
- The medical premium paid towards the coverage for your siblings, grandparents, uncle, aunt or other relatives in the family will not be eligible for a tax deduction under Section 80D<
- Any premium paid for children who are independent and working cannot be applied for the benefit of tax deduction
- If you and your parents have made a part payment, it is possible for both the parties to claim a medical insurance tax benefit to the extent contributed by each.
- You cannot apply for a deduction for the premium paid towards a group health insurance plan offered by the company
How to choose a medical insurance policy?
There are many factors you need to keep in mind while buying a health insurance policy . The medical insurance tax exemption should not be the only reason for you to invest in the policy. You must ensure that you enjoy adequate coverage and financial protection. Ensure that the payment is done by any mode apart from cash and choose an insurance company that has a cashless claim settlement procedure.
The room rent, as well as other expenses, will be allowed on a certain percentage of the sum insured. So, check it thoroughly and ensure that you have an adequate sum insured. Read through the clause related to pre- and post- hospitalisation expenses because many provide for all the expenses incurred one month before hospitalisation and three months after hospitalisation.
Choose the right policy for yourself. A lot of insurance companies are offering coverage for therapies like Siddha, Ayurveda, Naturopathy, Yoga, etc. It is important that you duly consider them.
Many companies also provide daily cash in the form of reimbursement for additional expenses like lab tests and doctor visits. You can also look for companies that offer annual health check-up as an added benefit. The check-up will include different tests and an overall evaluation of the health.
Most importantly, check with the insurance company about the no-claim bonus (NCB). It will make a huge difference to the premium amount you pay on the policy. When you do not make a claim in an entire year, you enjoy NCB, and it increases with each passing year.
Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.