Did You Know Health Insurance Plans Provide Tax Benefits?

Health insurance is undeniably a critical part of financial planning. You may have heard and read about this, but it only requires an experience to understand its importance. Not everything must be experienced and hence, prevention is better than cure. So, making use of a safety net of health insurance cover helps.

A medical insurance policy not only provides financial backup for hospitalisation costs, but also other expenses like ambulance charges, pre as well as post treatment procedures, costs of medical examinations and many more. But apart from these benefits of health insurance plans, it has a special benefit by way of tax saving.

The premiums paid for health insurance plans are eligible for a deduction in your income tax computation under section 80D of the Income Tax Act,1961. This, in effect, lowers the tax liability that is finally required to be paid. Here’s how much you can avail by way of deduction:

For parents

The tax benefits available for health insurance plans other than the standard policy benefits are available for both self, spouse, children and your parents. In addition, it doesn’t matter if such parents are dependent on you or not. However, the quantum of deduction available is based on the age criteria which is different for senior citizens and for others. The Income Tax Act defines senior citizens as all those individuals above the age of 60 years. So, if your parents are above 60 years, a deduction of ₹50,000 can be availed against the premium paid or else, capped at ₹25,000. *

For self, your spouse and children

The premiums paid for health insurance policies deductible not just for yourself, but also your spouse and children. It is common that a family floater plan is sought by breadwinners as it helps cover all the beneficiaries at once and more often than not includes spouse and children. The amount of deduction in such cases is again based on age limits. For any premium paid towards a senior citizen individual, be it yourself or your spouse, the maximum deductible amount is set at ₹50,000 whereas others enjoy the maximum amount as ₹25,000. *

The above paragraphs can be summarised in a tabular format below:

Health insurance policy for Deduction for self, spouse and children Deduction for parents Maximum Deduction
Self, spouse, and children (all below 60 years) ₹ 25,0000 ₹ 25,0000
Self, spouse, children and parents, all below 60 years ₹ 25,0000 ₹ 25,0000 ₹ 50,0000
Self, spouse, children below 60 years and parents classified as senior citizens ₹ 25,0000 ₹ 50,0000 ₹ 75,0000
Self, spouse and children and parents, all classified as senior citizens ₹ 50,0000 ₹ 50,0000 ₹ 1,00,0000

Health check-up facility: Apart from these deductions, you can also avail the tax benefit of health check-up facility which is set at ₹5,000. However, such amount is included in the maximum deductible amount as mentioned above. *

*The above tax benefits are subject to change in tax laws

One thing you must note is that the deduction of such premium is only permissible when the payment is made by modes other than cash which include authorised bank transfer or banking instruments. However, the payment for health check-up facility can be made in cash too.

When selecting a health policy, do not only consider the premium as a deciding factor, but instead, take into account your health requirements. There are various plans that can be compared for which a health insurance premium calculator can come handy. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

 

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