Health emergency is not a new-fangled word in your life. These medical contingencies can make your life miserable if you are not well-equipped to deal with them. Here comes health insurance which will not only help you to cope with medical emergencies but also makes you eligible for income tax deductions. Under the Income Tax Act, 1961 (80D), you can enjoy the benefits of tax deductions for health insurance premiums that you paid for yourself, your spouse, dependents, children, and even parents.
Let’s elaborate on what is section 80D and how health insurance helps you to save tax.
If you are paying medical insurance premiums for yourself and your family members, then this amount will be subtracted from your taxable income. There will be no deduction from your overall payable tax amount. The health insurance income tax benefits under section 80D will also be calculated based on the age of the insured person. Section 80 D of the Income Tax Act works in three ways.
Health insurance deduction in income tax
- By paying health insurance premiums for yourself, your spouse, and your dependent children, you may save Rs.25, 000 under section 80D of the Income Tax Act. For parents who are below 60 years of age, you will get an additional deduction of up to Rs. 25,000 for insurance of parents. In this way, your total deduction will be Rs. 50,000.
- But if your parents are senior citizens i.e. above 60 years old, then your deduction amount will be Rs 50,000. So, you can submit a claim for a total deduction of Rs 75,000. From this amount, Rs 25,000 will be the premium that you paid for yourself, your spouse and your dependent children and Rs 50,000 on the premium you submitted for your senior parents.
- But if you (as the taxpayer) and your parents are above 60 years, then you will be eligible for the maximum deduction under this section. Then, your tax deduction amount could be Rs.1 lakh (Rs 50,000+Rs 50,000).
These are the tax benefits that you will get with your health insurance policies.
With health check-ups, you will be eligible for more additional benefits
Section 80 D of the Income Tax Act is also beneficial in saving your tax for health checkups. Early health check-ups are necessary to prevent and detect various diseases at the beginning stage. Regular health check-ups will also inspire you to stay wholesome and protect you from various lifestyle diseases. Many prodigious health insurers welcome their policyholders with multifarious health check-up packages. The most intriguing fact is that preventive health check-up also inspires you to get a deduction of Rs. 5,000 from your income tax liability.
If you are paying a premium of Rs 25,000 per annum against health insurance plans and you have chosen health checkups for yourself, your parents, spouse, and dependent children during the financial year, then your total deduction amount will be Rs 30,000 (Rs. 25000+Rs. 5000 for check-ups) for a financial year. Section 80D of the Income Tax Act offers this additional benefit so that you can prudently manage your health insurance and enjoy the maximum tax benefits.
Income Tax benefits for indemnity-based plans
Indemnity-based health insurance plans also offer income tax benefits to policyholders.
The Indian health insurance sector is flooded with two popular plans and they are indemnity-based plans and defined benefit plans. An indemnity insurance plan only compensates for the actual expenditures of the insured policyholder in case of any hospitalization (up to the pre-decided limit). Based on the selected sum insured amount of the policyholder, the reimbursed amount depends. An insurance company will pay up to the sum insured amount as a claim to the policyholder as per the policy terms and conditions.
On the other hand, defined benefit insurance plans offer the most financial protection against critical diseases (predefined events). If an insured policyholder is identified with any of the mentioned critical diseases, then he/she will receive the entire sum insured amount from the insurance provider. The Section 80D benefits are eligible for both these plans.
You will be eligible for income tax deductions under Section 80 D irrespective of whether you are paying premiums for an indemnity-based plan or a defined benefit plan. Depending on your requirements, you can handpick any type of insurance plan and avail of the tax benefits.
Things to consider when selecting a health insurance policy
- Go through the claim settlement ratio of the insurance company
- Check the network hospitals where you will get a cashless treatment
- Easy online purchase and renewal procedure
- In-built team for a hassle-free claim settlement process
- 24X7 assistance and support
These days, everyone should opt for a health insurance policy as these policies will not only cover your health emergencies but also help you to get income tax benefits against your plans. PayBima is a reputed online platform where you will get many health insurance plans from various insurers. Go through the plans and choose the most beneficial one for you prudently.