The importance and benefits of health insurance are known to all. Health insurance provides a cushion against the spiralling healthcare costs and guards you against any financial stress that you might encounter due to a medical condition.
However, not many are aware of the fact that a health insurance policy not only safeguards the insured against the financial pressure that comes along with a medical crisis but also aids in fulfilling an individual’s financial goals by providing tax reliefs.
Health insurance and tax benefits
Under Section 80D of the Income Tax Act, 1961, the premium that one pays in lieu of a health insurance policy is eligible for income tax exemption. This benefit applies to multiple plans and can be availed only if the premium is paid through cheque or demand draft (DD).
The premium paid for critical illness insurance, family floater plan or a rider is also eligible for tax exemption. Further, the tax benefit on health insurance stands valid even if the children and parents are not dependent on the policyholder.
Tax benefit on the premium paid for health insurance
The accrued health insurance tax benefits are assigned based on the age of the insured. A policyholder whose age is less than 60 can get tax benefits of up to Rs. 25,000 for paying hea;th insurance premiums for self, spouse and children. For a senior citizen, this exemption is capped at Rs. 50,000. If one pays the premium towards a health insurance policy for his/her parents who are senior citizens, then he/she can avail an additional tax exemption of Rs. 50,000 in a year.
Thus, a policyholder whose age is less than 60 years and who pays a health insurance premium for self, spouse, children and parents who are above 60 can make a tax exemption claim up to an amount of Rs. 75, 000 (25,000 + 50,000). The maximum deduction claim that a policyholder aged 60 or above can make is Rs. 1 lakh (50,000 + 50,000).
Moreover, there is a sub-element of preventive health check-up, the sub-limit for which is capped at Rs. 5000. Thus, if one pays Rs. 20,000 for health insurance and Rs. 5000 for preventive health care check-up, the total eligible deductible amount will be Rs. 25,000. Further, for very senior citizens (80 and above), preventive health check-up expenses up to Rs. 1 lakh can be claimed for tax exemption.
In a nutshell
|Scenario||Tax exemption on the premiums paid||Tax exemption on preventive health check-up||Total tax exemption|
|When you and your parents are below 60 years of age||Rs. 25,000 + Rs. 25,000||Rs. 5,000||Rs. 55,000|
|When you are below 60 years and your parents are above 60 years||Rs. 25,000 + Rs. 50,000||Rs. 5,000||Rs. 80,000|
|When you and your parents are above 60 years of age||Rs. 50,000 + Rs. 50,000||Rs. 5,000||Rs. 1,05,000|
Hence, in the background of rising healthcare costs, buying health insurance comes with multi-dimensional benefits. The premium paid against health insurance not only goes a long way in safeguarding your lifelong savings, that would have otherwise been depleted in the wake of a medical contingency, but also bulges your bank balance by providing many tax sops.
Bajaj Finserv Pocket Insurance offers varied and easy insurance solutions for your regular health-related needs. You can browse across a range of short-term insurance plans – spread over various categories – and select the ones that cater to your immediate insurance requirements. These insurance policies can be purchased by paying a very nominal one-time premium. For instance, with the festive season approaching and firecrackers becoming a part of almost all festivities, you can purchase a Firecracker Insurance at an annual premium of Rs. 549 only. It will provide a high coverage of up to Rs. 1 lakh and protect you against the threat of accidental burns, injuries, and disabilities due to firecrackers.