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Tax Benefits for Health Insurance

Health insurance is a boon that can save your finances. You are protected financially in times of need so that you can fully concentrate on recovering from health setbacks instead of worrying about piling medical bills. With the development of the healthcare industry and rising inflation, medical treatments have become costlier than ever before. If your health is insured, you would not have to dip into your savings to pay off your medical bills as the insurer takes care of those. You just have to pay regular premiums to the insurance provider and in return they cover you financially in cases of medical emergencies. Not only does health insurance form a safety net for you to fall back on, but it also gives you other benefits such as tax deductions. These savings can be significant and can help reduce your tax liability. Also, most of these policies are based on annual renewal where you have the option of opting out or changing the add-ons during the renewal period.

As per Section 80D of the Income Tax Act, the premium paid against your health insurance plans are eligible for tax deductions. These deductions depend upon various conditions and may vary according to the situation.

Read on to know more about the eligibility criteria for claiming deduction under Section 80D of the Income Tax Act.

Eligibility to claim the deduction-

  1. You are eligible to claim deduction under the section if you’ve paid a premium amount for the health policy taken for self, spouse, children, and parents. It doesn’t matter if your parents are dependent on you or not.
  2.  Additionally, if your parents are aged above 80 and do not have their own health insurance then you are eligible for tax exemptions if you have incurred expenses relating to their medical treatments or check-ups.
  3. Premiums paid for the health insurance policy for your siblings are not eligible for deductions under the section.

If you tick off all the eligibility criteria then the maximum tax deduction available to you is up to Rs 1 lakh per annum this is in case you and your parents are both above the age of 60, hence making you senior citizens. The deduction will be Rs 50,000 for you and Rs 50,000 for your senior citizen parents.

Deduction Amount

  1. You are allowed to claim a deduction up to Rs 25,000 per annum for a health insurance premium.
  2. If you or your spouse is aged 60 or above the amount can go up to Rs 50,000 per annum.
  3. For expenses relating to preventive healthcare checkups, you can get deductions up to Rs 5,000 per annum.
  4. If your age is 80 and above and if you don’t have an insurance policy of your own then the deduction available to you is Rs 30,000 every financial year. This expense does not include personal expenses rather only medical expenses like checkups and treatments are eligible.

Section 80D has been further broken down into two sections to serve specific medical needs better.

  1. Section 80DD- This section covers expenses that are undertaken by the policyholder to support a dependent disabled person. The deduction amount available to you in such cases is Rs 50,000 and in severe cases, the amount can go up to Rs 1,00,000.
  2. Section 80DDB- This section covers expenses incurred for treating certain diseases specified under Rule 11DD. The deduction amount available if you are under 60 years old is Rs 40,000 and if you are above 60 years then the deduction amount available to you is Rs 60,000. If you are a super senior citizen, that is, 80 years and above the deduction available is Rs. 80,000. Some of the diseases mentioned in this section are- Cancer (malignant), AIDS, Parkinson’s disease, Haemophilia, Thalassaemia, etc.

Exclusions under the Section

Exclusions are conditions that prevent you from claiming the tax deductions.

  1. Tax benefits for the premium paid for continuing health insurance protection are only available if such premiums are paid through cheque or Demand Draft (DD).
  2. If you have paid the premium for the health insurance through cash then you are not eligible to claim the deduction offered. But if you have made the payment for preventive health checkups in cash, then the deduction is available.
  3. Such tax benefit is only available to you if you are a part of the Hindu Undivided Family (HUFs). Tax benefits for payment of health insurance premiums are not available for corporate firms.
  4. Service tax and CESS amount are not covered as deductions.
  5. Group Health insurance is also not eligible for deductions.
  6. Premium paid for covering the health insurance of your siblings are not eligible for deductions.

Documents required to claim the deduction-

The only documents that are required to file a claim for deductions are your premium payment receipt and a copy of your insurance policy. The policy document is important as it states the names, relations, and ages of all the people covered under that policy. In case you are paying the premium for your parent’s insurance policy, you can ask the insurance company for an 80D certificate. In case you are filing for deductions under section 80DDB then you will require an endorsement from the specialist.

Conclusion

While applying for health insurance, you should make sure that you have disclosed all your medical conditions beforehand. Undisclosed conditions can result in your policy getting cancelled and you would no longer be protected financially against medical emergencies. This can defeat the core purpose of insuring yourself in the first instance.

You can be financially wise and avail these deductions that are made available to encourage more income-earning people to get their health insured so that a larger portion of the population of India is not left stranded with debt dur to medical emergencies or worse, unable to pay for required healthcare. That being said, you should ensure that the plan you choose covers your health entirely and other medical situations that may arise. You should not chase after plans that give you higher tax benefits. You should stay informed about such benefits and ensure that you are getting your money's worth.

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