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Health Insurance 844 views November 10, 2020
Wondering how to increase your take-home income? Well, one way is to buy health insurance. With this, you can not only save on medical bills but tax as well. But are you aware of how tax benefits on health insurance work out? If not, read the post and find out how the government encourages you to buy health insurance. As per the prevalent income tax laws under Section 80D, you can avail of a tax deduction that can increase your take-home income. For more information on the health insurance tax benefit, read this post further.
Table of Contents
As per the Income Tax Act, every individual or Hindu United Family (HUF) can claim the health insurance tax benefit under Section 80D from their annual income tax payment in a financial year. Not only does this give you the advantage of purchasing a health insurance plan for yourself, but it also helps you buy the policy that covers your spouse and the dependent children or parents. And the plus point is that, it is over and above the deductions claimed under section 80C/CCC/CCD.
According to the law, an individual can claim a deduction of up to INR 25,000 for the insurance of self, spouse, and dependent children. Whereas an additional deduction for the insurance of parents is available up to INR 25,000 if their age is less than 60 years, or INR 50,000) if their age is above 60 years. In case both the taxpayer and parent for whom the medical covers have been taken are aged above 60 years, the maximum deduction under section 80D would be INR 1,00,000. Check out the table below to know the quantum of deduction available to an individual taxpayer under different scenarios:
Scenario | Premium paid (INR) | Deduction under 80D (INR) |
---|---|---|
Individual and Parents (below 60 years) | 25,000 | 50,000 |
Individual and family (below 60 years but parents above 60 years) | 25,000 | 75,000 |
Both individual, family and parents (above 60 years) | 50,000 | 1,00,000 |
Members of HUF | 25,000 | 25,000 |
NRI | 25,000 | 25,000 |
In a health insurance policy, senior citizens are also included. For instance, Madhur is 45 years old, his father is 75 years old. Madhur borrows a medical cover for himself and his father for which Madhur pays an insurance premium of INR 30,000 and INR 35,000 respectively. Here, Madhur can claim up to INR 25,000 under section 80D, for the paid premium in his policy. Madhur’s father is a senior citizen for whom he took insurance. For this, Madhur can claim up to INR.50,000. In this case, the health insurance tax benefit is INR 25,000 and INR 35,000. Therefore, Madhur gets a total deduction of INR 60,000.
Similarly, a HUF can claim a deduction for health insurance for any of its members. In this, the deduction will be INR 25,000 (if the member is less than 60 years), and INR 30,000 (if the insured is 60 years or more).
The actual savings due to health insurance tax benefits would vary depending on the premium you pay and the policy you buy. There are several types of health insurance policies in India that you could take.
Things to Know If you are Buying a Health Insurance
As per the Insurance Regulatory and Development Authority (IRDAI), you can only claim the health insurance tax benefit by fulfilling the below-mentioned conditions.
Health insurance targets different healthcare-related needs. Different types of health policies come with health insurance tax benefits under Section 80D which adds to the savings for you. With this feature, you can take advantage of the financial impact of medical expenses and also save tax out of it. Check out the types of health insurance policies available in India –
Your choice of health insurance policy can help you access financial cover against complex and health-related risks. If one opts for a smart combination, he/she can get both the health insurance and tax benefits to aid his/her savings. However, if needed, you can consult an adviser who can help you understand the health insurance combination.