It goes without saying that having a health insurance policy is necessary. Not only it covers you against medical emergencies but also offers you tax benefits u/s 80D. No matter if you are buying a health insurance policy for your family, self, or parents, the amount paid towards health insurance premium offers tax exemption that reduces your tax liability.
Let's understand more about section 80D -
Section 80 D of the Income Tax Act, 1961, pertains to tax deductions given on medical insurance. Most financial planners recommend that the first step in any financial plan should be to ensure that one has sufficient health insurance cover.
Here are a few essential facts you should know about the tax benefits of health insurance plans-
Health Insurance Premiums
The maximum tax deduction for your health insurance policy under section 80D is ₹25,000 a year. Tax exemption of ₹25,000 is given for someone who is less than 60 years old. If your parents or your spouse are older than 60 years, then you can claim tax benefit of up to ₹30,000.
If you and your spouse are below 60 years, but your parents are above 60 years, then you can claim a total deduction of up to ₹55,000. Likewise, if your spouse, parents, or you are more than 60 years, then you can claim a full deduction of up to ₹60,000.
Under section 80D, you can also get a benefit of up to ₹5,000 for the preventive health check-ups. Let's understand it better with an example- suppose, if the premium for your health insurance policy is ₹22,000, and you had to pay ₹3000 for health check-ups, then you can declare a deduction of ₹25,000 u/s 80D.
Indemnity and Fixed Benefit Health Insurance Plans
There are 2 main types of health insurance plans- indemnity-based health insurance plans and defined-benefit health insurance plans.
The indemnity-based health insurance plan covers the cost of medical costs incurred during hospitalisation. The plans that come under indemnity-based health insurance are mediclaim and family floater plans.
Defined-benefit health insurance plan pays a lump sum amount to the insured irrespective of the actual hospital expense. The plans that come under indemnity-based health insurance are critical illness cover and daily hospital cash plan. Both these types of plans qualify for tax deduction u/s 80D.
Now let's understand which condition does not qualify the tax exemptions.
If you had paid the premium of your health insurance in cash, then your health insurance premium does not qualify for tax benefits u/s 80D. If you want to get tax benefits, you have to pay via digital mediums like net banking, or other means like a credit card, cheque, draft, etc. On the other hand, paying cash for a preventive health check-up in cash still qualifies under the tax benefits criteria.
So get a health insurance for you and your family, and get coverage against healthcare-related expenses while garnering excellent tax benefits.