Medical emergencies usually take us by surprise. While we can't predict what our future holds for us, we can ensure we are prepared to deal with any unfortunate events. One of the best methods to stay ahead of medical emergencies is by opting for a health insurance plan.
A health insurance policy is designed to help you deal with the medical bills arising from any medical emergencies. Therefore, the benefits of health policies can be quite helpful for us in the long run. However, the health policy's benefits are not only restricted to providing financial assistance. You can also get health insurance tax benefits as per Section 80D of the Income Tax Act.
What is Section 80D of the Income Tax Act?
Every HUF or individual can avail of tax benefits from their total income for the health insurance premiums paid in any given year as per Section 80D. The deduction is also provided for critical illness plans and top-up health insurance plans. The tax deduction benefit is available not only for a health insurance policy you have purchased for yourself; you can also get the tax benefits for buying the policy to cover your spouse or any dependent children or parent.
Who receives tax benefits in health insurance?
Tax deduction for medical insurance premiums and the medical expenses for senior citizens is allowed to individuals or the HUF category in the taxpayer's list.
The tax benefit on health insurance is eligible if the medical policy is purchased for:
- Dependent children
- Dependent parents
Other entities like organisations, firms, companies, etc., cannot claim a tax deduction under Section 80D.
How to calculate tax benefits on health insurance?
The health insurance benefits in tax are quite beneficial, as you can save on the amount you are paying as taxes. However, the taxation benefit in health insurance is different in different scenarios. Listed below are some of the scenarios that will help you understand how the tax benefit in health insurance is calculated:
- If you've purchased the health insurance plan for yourself and your family where all members are under the age of 60, the deduction amount under Section 80D is ₹25,000.
- If you've purchased the health insurance plan for yourself and your family and an additional plan for your parents (all members below 60 years), the deduction amount is ₹50,000 (₹25,000 + ₹25,000).
- If you've purchased the health insurance plan for yourself and an additional plan for your senior citizen parents, the deduction amount under Section 80D is ₹75,000 (₹25,000 + ₹50,000).
- If you've purchased the plan for yourself and your family (where the eldest individual is above 60 years) and an additional plan for your senior citizen parents, the deduction amount is ₹1,00,000 (₹50,000 + ₹50,000).
Facts You Should Know About Medical Insurance Tax-Benefits:
- Coverage for your parents: If you purchase a health insurance plan for your parents, you get tax benefits as per Section 80D of the Income Tax Act. The premiums paid towards a health insurance policy purchased for yourself, your spouse, children, and your parents are tax-free. Moreover, the benefit is provided regardless of whether your children or parents are dependent on you or not. The tax benefit amount you can get for the health insurance policy will depend on your age. If all the individuals involved in health insurance are below 60, you can get a maximum of ₹25,000 as a tax benefit in a financial year. However, if your parents are above the age of 60, you get a benefit of ₹50,000 on the taxable income. You can get tax benefits up to ₹75,000 as per Section 80D of the Income Tax Act. If you and your parents are above 60 years of age, you can get tax benefits of ₹1,00,000.
- Critical illness and riders: Section 80D does not limit your tax benefits to the insurance plan. You can get tax benefits on the add-ons or riders bought with your existing health insurance plan. Along with this, your critical illness insurance will also be eligible for tax benefits.
- Preventive health check-ups: Regular health check-ups help you identify health risks before they turn into a serious issue. If you own a health insurance plan, your preventive health check-ups would also qualify for tax benefits. You can claim a tax exemption on the preventive health check-ups of up to ₹5000 annually for the parents who are 60 or below. For individuals who are above 60 years of age, the limit goes up to ₹7000. The tax benefit is on top of the tax benefit on a premium you have already paid towards the insurance plan. For instance, if your yearly premium for the health insurance policy is ₹15,000 and your health check-up cost comes to ₹7000, you can file a claim tax benefit for the entire sum of ₹22,000.
With a health insurance plan in your portfolio, you will get certain tax benefits on the premiums you pay. You can get decent tax benefits if you're purchasing the health insurance plan for yourself, your family, your children or your parents. Along with this, the tax benefits are also extended to the riders and your preventive health check-ups. So getting health insurance and tax benefits under the same plan can be quite advantageous for you.