Six Lesser-Known Facts About Tax Benefits On Health Insurance
By Shreeraj Deshpande
A health insurance plan must be a crucial part of your financial planning. It not just supports you financially and enables you to access quality healthcare, it is also significant in tax saving.It offers tax advantages under section 80D in addition to protecting against unexpected medical expenses. Health insurance policies purchased for one's spouse, children, and parents offer exemption from taxes. Most financial planners advise having sufficient health insurance as the first step in sound money management.
There are several tax-saving benefits for health insurance. Let's look at a few of them below:
Income Tax Exemption Under Section 80D
The cost of a health insurance policy's premium is deducted from taxable income under Section 80D of the Income Tax Act. The deductible amount can range from Rs. 25,000 to Rs. 50,000. If the parents are under the age of 60 years, the limit for deduction under Section 80D is upto Rs. 25,000 and if the parents are above the age of 60 years the limit for deduction under section 80D is upto Rs. 50,000. The maximum deduction allowed under Section 80D for individuals under the age of 60 is Rs. 25,000. Moreover, health insurance plans can be divided into two categories: indemnity plans and fixed benefit plans. Both health insurance plans qualify for tax exemption under Section 80D.
Deduction on Preventive Medical Check-ups
You can save tax on preventive health check-ups on a yearly basis. Under this feature, you can claim a maximum amount of Rs. 5,000 subjected to the overall limits.
Tax Benefits on a Multi-Year Health Insurance Policy
People who opt for multi-year health insurance plans and have the choice of getting prorated premium discounts and tax advantages depending on the number of years for whichthe policy is purchased. For instance, if you paid Rs 30,000 for a three-year health insurance policy, you can claim the tax exemptions of Rs. 10,000 for each year.
Mode of Payment
Cash payments for health insurance premiums are not eligible for tax exemption. To be eligible for a tax deduction, the premium must be paid through a method other than cash.Acceptable premium payment methods to qualify for tax deduction include net banking, credit card, debit card, cheques, digital channels, etc. Cash payments made for preventive medical exams, however, are tax deductible.
Premiums on Critical Illness and Riders
Health insurance income tax deductions are also available for the premiums paid on family floater plans, which typically cover your spouse, children and any parents who are dependents. It is important to remember that any insurance "riders" or add-ons that you purchase along with your current policy and critical illness coverage can also be deducted from your overall health insurance tax benefit.
Add-ons:
Section 80D tax benefits apply to super top-ups, disability riders, and critical illness plans in addition to health insurance plan deductions. The policyholder can use these deductions in addition to protecting themselves from unforeseen medical expenses. The main reason for purchasing a health insurance plan should be to protect you and your loved ones, not just to receive tax advantages.
Health insurance not just secures your finances during medical emergencies, it is also commonly suggested by financial advisors as a very effective approach to save taxes. Hence, it is advisable to buy an adequate and comprehensive health insurance policy to ensure the protection of your Health aur Wealth Dono.
-Authored by Mr. Shreeraj Deshpande, Head – Health Businesses, SBI General Insurance.
