Lesser Known Facts About Tax Benefits of Health Insurance

Save more tax with health insurance, the smart way

It’s the tax season and you have to find new ways to save more on taxes. A little-known fact is that you can save more with health insurance if you invest prudently.

Either you have a basic health insurance plan provided by your employer or an independent one, it comes with several benefits. These benefits not only pay for medical bills but also extend to reduce your tax liability with:

Coverage for Your Parents

Avail a health insurance policy for your parents and save tax under Section 80D of the Income Tax Act. The premium paid towards a health insurance policy taken for self, spouse, children and parents is tax-free. What’s more, this benefit is available regardless of your parents and children being dependent on you.

The amount of benefit you can avail for these policies depends on the age of insured. If none of the insured individuals is above 60 years old, you can avail a maximum of ₹ 25,000 as tax benefit in a financial year.

However, if your parents are senior citizens (above 60 years old), you get a maximum benefit of ₹ 30,000 on your taxable income. This adds up your tax deductions to ₹ 55,000 under Section 80D. Similarly, if both you and your parents are above 60 years old policyholders, you get a tax exemption of ₹ 60,000.

Preventive Health Check-ups

The tax exemption limits mentioned above include expenses for preventive health check-ups. The amount permissible is ₹ 5,000, which means if your premiums add up to ₹ 20,000, with this provision you can opt preventive health check-ups to avail ₹ 25,000 as exemption.

Check if your network hospital offers a preventive health check-up package. An annual check-up will help you and your loved ones be prepared against lifestyle-related diseases, and take preventive action early on.

It is important to remember that these tax benefits on health insurance policies are valid only if you pay by any mode other than cash. These modes include internet banking, cheque, demand draft and even credit card.

However, this rule doesn’t apply to preventive health check-ups. Payment for these can be made by cash and are exempt as per the conditions mentioned under Section 80D.

Add-ons

Section 80D does not restrict you to avail tax exemptions only on health insurance policies. super top ups, critical illness and disability riders are also included in the benefits. Thus, now you can not only utilise these exemptions but also stay protected from unexpected medical expenses.

Tax deductions can be availed on both ‘indemnity’ and ‘fixed benefit’ health insurance policies. Here, indemnity refers to the policies which pay for all the hospitalisation expenses, including pre and post hospitalisation costs up to the sum insured limit in the policy. Here, until and unless the entire sum insured in the policy is not utilised, the policy does not terminate, subject to timely policy renewal.

Fixed benefit health insurance policy pay you a lump sum amount on the first diagnosis/occurrence of the covered diseases. These policies include hospital cash and critical illness policies, wherein, the policy terminates after the payout is made.

It is a wise move to invest in health insurance policies for you and your loved ones not only for tax benefits but also for other coverage options. In addition, considering the double-digit medical inflation in the last decade, a health insurance that takes care of all expenses the cashless way will certainly help.

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