As the saying goes, a healthy mind resides in a healthy body. Taking care of one’s health in the current day and age becomes paramount in order to compete on any professional platform. Moreover, it is a harsh reality that the nature of most of our works is quite antithetical to our goal of maintaining a healthy lifestyle. This is why, health insurance plans are always in demand, as it helps in providing a financial cushion to your out-of-pocket medical expenses, thereby keeping you stress-free. Due to this high demand, investing in a health plan today is not a difficult task. However, understanding the intricacies of it, including the tax-saving benefits, can be quite confusing. So, let us discuss in detail how to benefit from such investments.
How to Save Your Taxes?
Most earning individuals are always looking for opportunities to legally save as much tax as possible by investing in financial markets such as insurance, mutual funds, loans etc. The investment made in health insurance is quite distinct from the other sources investment because of the Section 80D in the Income Tax Act that covers health insurance. This Section allows you to make the additional investment over and above your mandatory limit of 1.5 lakhs under Section 80C of the IT Act. The maximum limit in this case also differs depending on the age of the person insured.
Health Insurance for Self, Spouse and Children
If your family health insurance covers your spouse and your children, the premium which you pay against this insurance is tax-deductible, thereby reducing your taxable income. However, the maximum tax benefit that you can get is Rs 25,000, so if the premium exceeds Rs 25,000, the exceeded won’t be counted in a tax deduction. You can avail this tax benefit under Section 80D by paying the premium on your health insurance. Nonetheless, there is a specific condition of the age limit, which increases the tax benefit to Rs 50,000. Any individual who is 60 years or above and is covered under health insurance is eligible for a tax benefit on their premium payment of Rs 50,000. The provisions here are also applicable to individual health insurance plans.
Health Insurance for Parents
In case your health insurance also covers your parents as well, there is an opportunity to save more on your taxes. Here, you are eligible for an additional tax benefit of Rs 25,000 on the premium payment. However, this limit can also be stretched to a maximum of Rs 50,000 in case the parents are 60 or above.
Thus, the total tax benefit, where the age of both parents, as well as the individual, is 60 years or above, is Rs 1, 00,000. Furthermore, in order to avail these tax benefits under this Section, the premium must be paid through any medium except cash.
There are instances when the premium paid does not reach the maximum limit permissible under Section 80D of the IT Act. It is only in those case that an amount of Rs 5,000 is allowed as a tax benefit, which is also the maximum limit under preventive check-up for both individuals as well as parents. Moreover, this part also allows cash as a mode of payment, unlike the other two. It is seen that prominent hospitals also offer preventive health check-up packages, so it is always better to get a health check-up, especially now, when lifestyle diseases are on the rise.
Tax Benefits Available on All Types of Health Insurance
Tax benefit under Section 80D qualifies for both 'indemnity' and 'defined benefit' kinds of health insurance plans. Even if you are buying defined benefit plans such as daily hospital cash plan or a critical illness plan from any standalone general insurance company or a health insurance company, it would still be eligible for such tax benefit.
Life Insurance Companies Riders
Moreover, in cases, where insurance premiums are paid for medical insurance or critical illness riders in a life insurance policy, the tax benefit would be still be allowed under Section 80D of the Income Tax Act. The Section does not restrict one to buy health plan only from health insurance companies.
However, as the primary factor for buying an insurance policy is financial protection against health ailments, it is imperative that before enrolling into an insurance product, the policy document must be thoroughly examined so as to comprehend all the nitty-gritty of the plan. One also needs to check the premium that would be applicable with the insurance by using their health insurance calculator.