Most financial experts recommend that the first thing one must do while planning their finances is making sure they have adequate health cover. Even before you start saving for your goals, you should set aside a portion of your income for health insurance (for self and family).
Considering the rise in medical costs and the increase in the number of people falling sick every year, one cannot go without purchasing health coverage.
But did you know the government is doing everything to encourage its citizens to buy a health insurance policy?
Yes, you receive a tax benefit for the health insurance premium paid, meaning reduced taxable income and tax liability.
Here’s what you must know about the tax benefits of health insurance plans.
Limits of Claiming Tax Benefit
You are qualified for a tax deduction under section 80D of the Income Tax Act if you pay health insurance premium for yourself and/or your family. However, there’s a predetermined quantum amount, i.e. the maximum deduction, which is capped at ?25,000, provided the individual is below the age of 60.
If an individual, say your father, is over 60 years of age, the maximum cap for him will extend to ?50,000. That being said, if you are paying the premium for yourself and your father, you are entitled to receive a maximum deduction of ?75,000.
Now, if your age is 60 or more, but you are also paying health insurance premium for your father, the maximum tax benefit you can receive for the two of you is ?100,000.
Regular preventive health check-ups give you an additional tax deduction of up to ?5000. Let’s say, your tax deduction for premium is ?20,000 and your health check-up costs you around ?4000. Hence, ?24,000 will be deducted from your taxable income.
Tax Benefit is Applicable to All Types of Health Insurance
Along with the indemnity plans that include Mediclaim and Family Floater plans, defined benefit plans from a general insurer or a standalone health insurer also qualify for tax deduction.
Life Insurance Company Riders
As section 80D allows a tax benefit towards the premium paid for health policies, you are entitled to get the tax benefit for critical illness and/or medical insurance riders in a life insurance policy as well.
Section 80D does not allow the taxpayer to pay for their premium via cash if they want to avail the tax benefit. However, you can choose payment methods such as net banking, cheque, credit card, etc.
In spite of everything mentioned above, saving taxes shouldn’t be the primary reason behind buying health insurance. It is crucial to provide yourself and your family with the best medical assistance during health crisis. But the cost of healthcare services is sky-high, meaning we cannot afford the right treatment. Thus, quality healthcare services should be your motivation to buy a health insurance policy.
At Chola MS, we have a range of health insurance policies, both individual and family floater plans. Get in touch with us and our executive will help you buy the right insurance policy.