Buying a health insurance policy provides financial security in two ways: the first is protection against medical costs in case of an illness and the second one is through savings on your taxes. A policyholder is eligible for tax exemption under Section 80D of the Income Tax Act for the premium paid. These exemptions apply over and above the exemption provided under section 80C of the IT Act, that provides tax relief for investments.
Here are some important things that you should know about the tax benefits of buying a health policy:
- According to Section 80D of the Income Tax Act, you can save tax by paying a premium for self, spouse, dependent parents, and dependent children. These benefits are available for top-up plans as well.
- Premium paid for relatives (non-dependent children over the age of 25, sister, brother, uncle, aunt, grandparents, etc.), premium paid in cash, and group health insurance premiums are NOT eligible for tax benefits.
- There are variations in the benefit amounts based on the following scenarios:
- You, your family, and parents all below the age of 60 years – A claim amount of Rs. 25,000 is allowed for you, your spouse, and your children. A further claim of Rs. 25,000 is allowed for your parents. A total of Rs. 50,000 can be exempted against premium paid.
- You and your family below the age of 60, parents above 60 – A claim amount of Rs. 25,000 is allowed for you, your spouse, and your children. A further claim of Rs. 50,000 is allowed for your parents. A total of Rs. 75,000 can be exempted against premium paid.
- You, your spouse, and your parents all above 60 years of age – A tax exemption of Rs. 50,000 for you and your spouse, and another 50,000 for your parents will apply. A total of Rs. 1 lakh can be claimed under tax benefits.
- You can avail tax benefits of up to Rs. 5,000 for preventative health check-ups on a yearly basis, under Section 80D of the Income Tax Act. But keep in mind that the total limit is only Rs 25,000. What it means is that your preventive checkup benefit and benefit on premiums combined cannot exceed Rs. 25,000.
- NRIs can avail the tax benefits along the similar lines as a resident Indian. But premiums paid for parents can only be considered if they are senior citizens.
- Senior citizens (between the ages of 60 and 80 years) can claim deduction of up to Rs. 50,000 every year, and a further deduction of Rs.1 Lakh for medical treatment of particular critical illnesses.
As a policyholder, you are eligible for these benefits and you should use them to save on your taxes. The net result of these savings is that, indirectly, your premium gets cheaper while your finances get secured.
OneAssure is a distribution platform that helps you make right decisions on matters where health and finances converge. Visit oneassure.in to know more about your health insurance choices.