When it comes to dealing with medical bills, Health Insurance provides firm support. Many people know that medical insurance has various benefits like providing cover for hospitalization, diagnoses, ambulances, etc. However, only a few people know that Health Insurance helps people save tax.
Health Insurance is an essential investment that one should make. But the problem that our country faces is that many people do not think of medical insurance as a necessary investment. Apart from lack of awareness, this could be due to the fact that a Health Insurance Policy does not provide tangible benefits. But its use comes eventually and acts as a lifesaver in times of need.
Knowing the significance of Health Insurance, and to encourage people to get their lives secured with medical insurance, the Govt. of India facilitates income tax deduction. Under Section 80D of the Income Tax Act, 1961, one can avail income tax deductions for the premium paid towards a medical insurance policy. This is to promote the culture of buying Health Insurance for oneself and their families and to increase the penetration of Health Insurance across the country.
How does this provision, under Section 80D, help people to save money? If one’s annual income comes under the income tax liability, then that person can avail a tax deduction for the premium they pay to get Health Insurance coverage. One can avail of tax deduction of up to Rs. 25,000/- per year for paying the premium towards individual Health Insurance plans or Family Health Insurance plans, commonly known as floater policies that includes self, spouse and dependent children. This limit is applicable for people aged under 60 years.
In addition, one can also avail tax deductions for paying Health Insurance premiums for their parents. If the parents are aged below 60 years, then an additional tax deduction of Rs. 25,000/- can be availed. So, in total, one can avail a total tax deduction of Rs. 50,000/- for paying the medical insurance premium for their families and their parents.
The probability of health risks increases with age. This may be seen as a liability by the Health Insurance companies, as a result, the premium may be comparatively higher for the elderly. Also, the elderly may have some pre-existing health conditions that might increase their policy premium. To ease the financial distress, Section 80D of the Income Act, 1961 facilitates tax deduction of up to Rs. 50,000/- for people who are aged above 60 years to pay Health Insurance premiums for self, spouse and dependent children.
Similarly, an additional tax deduction of up to Rs. 50,000/- can be availed for paying medical insurance premiums for parents who are aged above 60 years. So, in total, a person whose age is above 60 years can avail a total income tax deduction of up to Rs. 1,00,000/- for paying Health Insurance Premiums for their family including parents.
Apart from this, the members of Hindu Undivided Family (HUF) can also avail income tax deductions under Section 80D of up to Rs. 25,000/-. And, if the head of the HUF family is aged more than 60 years, then the applicable tax deduction is up to Rs. 50,000/- per year. Non-Resident Indians (NRIs) can also claim this tax benefit under Section 80D of up to Rs. 25,000/-, irrespective of the age, provided the Health Insurance policy is purchased in India.
This tax deduction is not only for paying medical insurance premiums. It can also be used on Preventive Health Check-ups. People aged below 60 can avail themselves of a tax deduction of up to Rs. 5,000/- on preventive health check-ups, whereas the deduction is up to Rs. 7,000/- for those who are aged above 60.
Tax deduction under Section 80D helps motivate people in purchasing as well as renewing their Health Insurance plans, as the deductions can be claimed for every financial year. These deductions can also be used on paying premiums for rider plans, otherwise called top-up plans and critical illness plans. However, it is important to note that this tax benefit cannot be availed for Group Mediclaim Policies (GMC) as the premium will be paid by the employer.