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.
Learn more about different Health Insurance Plans here.
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.
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