Health Insurance & Tax Benefits: 7 Things to Consider

Almost 23% of people in India are at risk of premature death due to lifestyle diseases treating which can be an expensive affair. Around 61% of deaths are due to these diseases. When preventing diseases is the most cost-effective strategy with ever-growing quality healthcare expenses, buying health insurance is the need of the hour.

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      We can’t deny that the penetration of health insurance is very low in India because of the lack of awareness, lack of services or infrastructure.

      The financial experts suggest that buying health insurance should be in your financial portfolio, covering yourself and your family.

       

      Wait there is more...

      The premium paid for health insurance plan is tax exempted. It benefits you to save more by reducing the taxable income or tax liability. Let’s understand in detail:

      Reasons for Buying Health Insurance

      Buying health insurance is an utmost necessity these days. The below are some of the reasons why you should consider buying health insurance:

      Financial Safety against High Medical Cost

      A whopping percentage of Indians burnt a hole in their pocket when a medical emergency arises. With sky-high health care expenses, most of the families end up paying a huge portion of their savings. This severely affects their financial future. Having health insurance comes in handy when you entirely depend on your savings to mitigate those unexpected expenses. In India, there is no dearth of health insurers with exciting plans. For instance, health insurers like New India Assurance Company offers plans to cater to the needs of different people which cover the insured for pre and post hospitalisation expenses, domiciliary treatment cost, daily cash allowance in case of an emergency hospitalisation etc. The all you require is a little research, compare and buy.

      Save on Tax

      Health insurance doesn’t only help you pay the exorbitant healthcare expenses, but also to save on taxes. The premiums paid towards health insurance are qualified for tax exemption under Section 80D of Indian Income Tax Act. One can claim up to Rs. 25,000 up to the age 60 years on premium paid for health insurance, even for his/her spouse/ children/parents. If he/she is paying the premium for senior citizen, the claimable tax exemption limit is up to Rs. 30,000.

      How Much You Can Save on Tax

      Situation

      Tax Benefit under Section 80C of IT ACT

      when the premium paid for the parents with the age below 60 years and the age of the individual paying premiums is below 60 years

      Rs. 50,000

      when the premium paid for the parents with the age above 60 years and the age of the individual paying premiums is below 60 years

      Rs. 55,000

      If the age of the individual paying the premium is above 60 years and the parents whose age is also above 60 years

      Rs. 60,000

      Tax Benefits on Health Insurance Premiums

      When it comes to tax benefits, you should consider a few things. Here we go:

      1. Limit of Claiming Tax Benefit on Health Insurance Premium

      As per the Indian Income Tax Act, the premium paid towards health insurance is exempted from the tax deduction. The Section 80D of IT ACT says that the individual can claim tax benefits up to a certain limit on the premium paid for his/her, spouse, parents, children, irrespective of whether they are dependent or not.

      The amount of tax benefits one can avail depends on the age of the insured person. However, the maximum deduction one can avail for the premium paid towards spouse, children and parents is Rs. 25000/PA. The only condition is that the age of the insured should not exceed 60 years.

      In case the person is paying health insurance premium for his/her parents who is a senior citizen, the maximum tax benefit that can be availed is Rs. 30,000/PA. This way a taxpayer can maximise the benefits availed from health insurance if his/her age is below 60, by paying premiums for senior citizen parents as well.

      2. Amount of Saved Tax

      Someone with a health insurance policy for spouse and family with an annual premium of Rs. 25000, can avail tax benefits at 10%, 20% and 30% which comes around Rs 2,575, Rs 5,150 and Rs 7,725 respectively. This will be in addition to anything the insured saves under the Income Tax Act, Section 80C.

      3. Medical Check-ups

      When a maximum of Rs. 25000-30000 can be availed for paying a premium towards health insurance, going for a preventive health-check-ups one can avail an additional tax benefit up to Rs. 5,000. That means if your existing health insurance policy offers tax benefits up to Rs. 20000, by undergoing a health check-up of Rs. 5,000, the total tax benefit that can be availed in Rs. 25,000. With lifestyle diseases on the rise, it is always recommended to keep a constant eye on your health. That’s why most of the well-known hospitals offer preventive health check-up packages to benefit

      4. All Types of Health Insurance Offer Tax Benefit

      Not just the indemnity based plans offer tax benefit but only plans with defined benefits also come with tax benefits. Premium paid for indemnity plans like mediclaim policies and defined benefit plans like daily hospital cash or critical illness plan would qualify for tax benefit under Section 80D of Income Tax Act.

      5. Premium Paid Towards Life Insurance Companies

      Availing tax benefits doesn’t restrict one to buy health insurance only from general insurance providers and avail tax benefits. So, you can buy health insurance from life insurers as well. Premium paid for critical illness or other health insurance riders under a life insurance policy would also qualify for tax exemption under the IT ACT.

      6. Cash Payment and Tax

      Cash payment is allowed when it comes to paying the premiums on renewals. However, the experts suggest that one must avoid paying the premium on cash to avail tax benefits. You can pay via net banking, cheque, draft or by credit cards to qualify for the tax benefits. Cash payment is only beneficial in cash of availing preventive health check-ups and claiming tax benefits.

      7. Separate Plans for Parents

      In order to maximise the tax benefits, you can buy separate health insurance for your parents. This is especially recommended if one parent is below 80 years age and the other is above 80 years. The only condition is more health-check ups are required and the premium will be comparatively higher as well. Buying two separate plans for senior citizen parents, you not only earn tax benefits but also can ensure sufficient funds to take care of the financial obligations that may arise in case both the parents meet with a medical emergency.

      Wrapping it Up!

      However, tax saving should not be your only concern to buy health insurance. When medical costs are sky-rocketing and a single hospitalisation can cost you an arm and a leg, health insurance comes in handy to mitigate the unintended expenses. However, health insurance always comes with tax benefits that aid the individual with additional savings. As it is never too late, buy health insurance keeping the requirements in mind and analysing the cost of unexpected possibilities in mind. Lastly, as different plans may come with different features and benefits, make an informed buying decision with the help on online compassion tool; stay healthy and happy with health insurance!

      Disclaimer : *Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. 

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      Disclaimer: The list mentioned is according to the alphabetical order of the insurance companies. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website www.irdai.gov.in

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      *Product information is authentic and solely based on the information received from the Insurer. Policybazaar is acting only as a facilitator and claims settlement shall be at the sole discretion of the Insurer. Policybazaar does not provide any medical or surgical advice or diagnosis and is not responsible for your interactions / treatment by a medical practitioner/hospital. Please consult a registered medical practitioner for any medical or surgical advice. The Information that you obtain or receive from Policybazaar, and its employees, or otherwise on the Website is for informational purposes only. As per the Insurance guidelines, you are allowed to cancel the policy with-in 30 days from the date of Issuance of policy.This option is available incase of policies with a term of one year or more.

      *All the health insurance plans cover hospitalization expenses including COVID-19 treatment cover up to the specified limits. You can also buy specific COVID-19 health insurance policies such as Corona Kavach Policy and Corona Rakshak policy.

      **All savings and online discounts are provided by insurers as per IRDAI approved insurance plans. #Tax Benefits are subject to changes in tax laws. GST Exemptions depend on fulfilment of qualification criteria and submission of relevant documents.

      *₹1748/month is the starting price for a 1 crore health insurance for an 18-year-old male, with no pre-existing diseases. Discount on renewal premium is subject to the number of wellness points earned in the health insurance policy. For more details about the plans, please read the sale brochure carefully to get upto 100% discount on renewal premium.

      *₹400/month is the starting price for ₹ 5 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹541/month is the starting price for ₹ 10 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹762/month is the starting price for ₹ 1 Crore Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹243/month(₹ 8/day) is the starting price for a 5 lakh health insurance for a 20-year-old male, non-smoker, living in Bengaluru with no pre-existing diseases

      *₹2020/month is the starting price for ₹ 1 Cr Health insurance for a 50 year old male & 50 years old female, living in Bangalore with no pre-existing diseases rounded off to nearest 10.

      *₹390/month (₹13 per day) is starting price for 1 cr. Health insurance for 25 years old male, with pre-existing diseases, residing from tier 1 city rounded off to the nearest 10.

      *No medical tests are required unless requested by the insurer’s underwriter. In-case of pre-existing diseases relevant medical proof would be required as per the terms and condition of the policy opted.

      *The values taken for effective cost calculation are indicative values and may change as per the selected plan.

      *Coverage upto double the amount of Sum Insured is available on certain covers for a minimum plan of Rs. 5 Lakh on the first claim only to an individual of upto 45 years of age with no pre-existing diseases. The benefit is available with or without extra cost depending on the plan chosen.

      *Coverage of pre-existing diseases is provided by insurer as per their underwriting policy.

      *The scope of coverage may vary from plan to plan.

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