Lesser Known Facts About Health Insurance Tax Benefits
When it comes to insurance policies, health insurance is perhaps one of the most imperative plans you should have in your investment portfolio. In fact, it should be a priority to invest in a health insurance policy for yourself and your family even before you start saving for big goals.
After all, the way medical expenses are increasing, getting good treatment in a reputed hospital is not something everyone can afford. In such cases, health insurance turns out to be no less than a saviour.
That’s not it. A health insurance policy is also a great way to save taxes. The premium you pay for your health insurance is eligible for tax deductions; thereby reducing your tax liability.
If you are someone who is planning to buy a health insurance policy, here are some lesser known facts about health insurance tax benefits you should know:
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Tax Benefit Is Applicable To All Types of Health Insurance
Typically, there are two types of health insurance plans: indemnity and defined benefit plans. The indemnity plans are Mediclaim and family floater plans that cover the medical costs that occur during hospitalization. On the other hand, defined benefit plans are critical illness cover and daily hospital cash plans in which you get a lump sum amount irrespective of the actual hospital expense.
Now, whether you buy an ‘indemnity’ plan, ‘defined benefit’ plan or a plan from standalone health insurer, all types of health insurance policies are eligible for tax deduction under section 80D of the Income Tax Act.
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The Limit of Claiming Tax Benefits Varies
While you can claim the medical insurance tax benefits under section 80D of the Income Tax Act, the limit can change based on the medically insured’s age. For instance, you (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs 50,000, which has been increased in Budget 2018 from Rs 30,000.
In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh
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Additional Tax Deduction on Health Check-Ups
Along with the maximum limit of Rs. 25,000 on the premiums paid, you can also claim a tax deduction of around Rs. 5,000 on preventive health check up. This means, if you are paying a premium of about Rs, 20,000 towards your health insurance and also undergo a preventative health check up that costs you Rs. 5,000, you can avail Rs. 25,000 under section 80D.
No Cash Payment For Tax Benefits
There is one important rule you need to keep in mind for availing the tax benefits on the premiums you pay for your health insurance policy – always make the payment via net banking, cheque, credit card, etc.,
Section 80D does not allow tax benefits on the premiums paid in cash. That being said, you can use cash payment for preventative health check up and still get Section 80D tax benefits.
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Tax Benefit On Life Insurance Companies Riders
Since Section 80D allows the taxpayer to get tax benefits on the premium paid for health policies, it does not mean you have to buy a health plan from health insurance companies only. The taxpayer can also get tax benefit on the premium paid on the critical illness or medical insurance riders in a life insurance policy under the same section.
The Documents You Need For Claiming Tax Benefits
To claim tax benefits under Section 80D, you will need the receipt of payment of health insurance premium. This receipt contains essential details such as name of family members, their age, and relation specified for reference. Along with this, you will also need a tax certificate from the health insurance company from where you bought the policy.
In times when getting good healthcare is extremely expensive, health insurance comes as a huge helping hand. The policy becomes even more beneficial with its amazing tax benefits that we mentioned above. So, if you haven’t bought one for yourself and your family, make sure you purchase one as soon as possible.
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