Know the Ways to Save Tax on Your Health Insurance Policy
Looking at the soaring medical inflation, buying a health insurance policy should be made mandatory in India. Apart from covering your health, this insurance has an added advantage- premiums paid towards a health insurance policy get tax benefits. It means, in addition to helping you deal with medical expenses, a well-chosen health insurance plan can also help you lower your tax liability.
Here are a few things that you should know if you want to claim tax benefits on a health insurance plan:
Maximum Limit for Claiming Tax Benefits on a Health Insurance Policy
Premiums paid towards a health insurance policy qualify for tax deduction under Section 80D of the Income Tax Act. This benefit is available on a health insurance policy bought for self, spouse, kids and parents. The best part is that thetax break is available even if parents and kids are not dependent on you.
As it is evident from the below table, the quantum of tax deduction depends on the age of the insured.
|Cases||Self, Spouse, and Dependent Children||Parents (both dependent and non-dependent)||Total Tax Deduction|
|All the insured members are below the age of 60||Rs 25,000||Rs 25,000||Rs 50,000|
|Except parents, everyone is below 60||Rs 25,000||Rs 30,000||Rs 55,000|
|All insured members are above the age of 60||Rs 30,000||Rs 30,000||Rs 60,000|
Note, the maximum tax benefit available under Section 80D is Rs 60,000 and therefore, even if you pay more than Rs 60,000, there will be no additional tax benefit.
Choosing the Right Health Insurance Plan for Parents for Tax Benefits
To buy the best health insurance for your parents, it is essential to assess their current health state along with their requirements and claim history. To maximise tax savings, you can buy separate Mediclaim policies for your mother and father, especially if one of them is above 60. Also, in unforeseen situations, if both the parents face a medical condition, they will have two separate funds at their disposal.
But remember, higher the age, the more stringent medical check-up rules will be, and that will translate into higher premiums.
Preventive Health Check-ups
Within the maximum tax limit of Rs 25,000 and Rs 30,000, the tax benefit on preventive health check-up is Rs 5,000. It means if you pay Rs 15,000 as premiums towards Mediclaim policy and also undergo a health check-up costing Rs 5,000, the total available tax deduction is Rs 20,000 (15,000+5,000).
Tax Benefits Available on All Types of Health Insurance Policies
Tax benefits are available on all types of health insurance policies, i.e., indemnity and defined benefit.
It means, not just indemnity plans, like floater health insurance and individual policy, but also defined benefit plans, like critical illness plan, daily hospital cash, etc.; are eligible for tax benefits.
Along with this, if you have bought top-up and super top-up policies to expand the coverage of your current health insurance, you will get the similar tax benefits on them as well.
Tax Benefits on Life Insurance Riders
The Section 80D tax benefit is offered on the premium paid towards a health insurance policy, and therefore, it is not restricted to insurance plans of health insurance companies only. In fact, if you have bought a critical illness rider from a life insurance company, you will get tax benefits under the similar section.
You will get tax benefits on premiums only if you pay your premium in a mode other than cash. It means you can pay premium via internet banking, credit/debit card, cheque, etc. However, cash payment towards preventive health check-ups is eligible for tax benefits.
A health insurance policy gives you tax benefits, however, never buy the policy merely for tax savings. Your first objective of buying a health insurance policy should be to get protection against medical expenses. Like a cherry on a cake, tax benefits of a health insurance policy is only an additional feature. Just like a cake will taste good, even without the cherry, your Mediclaim policy will work even without tax feature.