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Here's How Health Insurance Is Becoming a Tax Saving Instrument

21 September, 2018

 

As far as financial planning is concerned, health insurance is pretty much the second most important policy one must invest in, after life insurance. Considering the increasingly debilitating medical inflation in the country and across the globe, seeking medical help is a task that requires much consideration. Whether it is a doctor's visit, lab test, prescription drugs or surgery -- the end result is often the same: a hefty chunk of money gone from our pockets. While most people can bear these expenses for a common illness, it can be a heavy burden to carry in an emergency. And that's when health insurance policies help the most.

There is a simple method to how health insurance works: you pay regular premiums to the insurer in exchange for a medical cover that helps you pay for your treatment and hospitalization costs. In case of an emergency, health insurance plans can save you from financial ruin, and also help you seek the treatment that you need. Additionally, insurance companies offer many riders and add-ons that enhance your coverage and provide a more comprehensive protection. Riders like maternity cover, critical illness cover, personal accident cover, etc. customize your policy as per your needs and requirements.

However, there is more to health insurance than just reimbursement of a big hospital bill. Health insurance is also a great tax saving instrument. Here's how:

Under Section 80D of the Income Tax Act, you can avail tax deductions against the premiums paid for health insurance policies for yourself, children, spouse or parents. The quantum of tax benefits, however, is based on the age group the insured falls under.

  • You can avail a maximum of Rs. 25,000 per budgetary year for deductions for premium paid for self, spouse and children.
  • You can avail an additional Rs25,000 for premium paid for parents.
  • If the parents are senior citizens, the eligible deduction goes up to Rs50,000/-
  • Thus, there is a total of Rs 75,000/- as deduction, available under Section 80D.

 

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