Almost every financial planner would recommend health insurance as the stepping stone of financial planning. Before making any investment related decisions or taking any risks, it is crucial to build a contingency fund to protect yourself against the uncertainties of life.
Health insurance is the shield that guards you against any financial stress that you might encounter due to a medical condition. With health care and the associated costs being taken care of, you can redirect your funds as well as focus on other financial goals.
Apart from being the cushion against the spiralling healthcare costs, health insurance also serves one more aspect of financial planning - tax exemption.
Health insurance and tax benefitsUnder 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. The premium paid for critical illness insurance, family floater plan or riders is also eligible for tax exemption. Further, the tax benefit stands valid even if the children and parents are not dependent on the policyholder.
Tax benefits and age of the insured/policyholderThe accrued tax benefits of availing health insurance 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 premiums paid towards 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) who are not covered under any health insurance, medical expenses up to Rs. 30,000 can be claimed for tax exemption.
Hence, in the background of rising healthcare costs, buying health insurance comes with multi-dimensional benefits. The premium paid against health insurance not only provides a financial safety net for medical expenses but also significantly aids in providing tax benefits.
Click here to know more about different health insurance plans.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
Tuition fee deduction under Section 80C of Income Tax Act
Educating a child can be an expensive proposition for most parents. As the cost of quality education is on the rise, the potential for saving money seems less likely. However, there are tax benefits that can be availed under the provisions of the Income Tax Act, 1961. Recurring expenses such as tuition fees is one such category that qualifies for tax relief, subject to certain terms and conditions.
6 Things you Should Know Before Buying Insurance Policy for Bike
Buying or renewing an insurance policy for your bike can often be overwhelming. Check out this short guide to know the factors you should consider while choosing the best insurance policy for your bike.
PPF Withdrawl: When & How to Withdraw PPF
PPF (Public Provident Fund) is a savings scheme, which is backed by the government on purpose to build a retirement corpus. As PPF is a long-term investment, it comes with a specified lock-in period. Read on to know about the maturity period and the withdrawal systems.
5 Types of Business Loan For Woman Entrepreneurs
There are now many different types of loans options in India for women wanting to explore their entrepreneurial dreams. Read this post to know 5 of the most popular options.