Health Insurance Tax Benefits

 

We live in an increasingly unpredictable world. Pollution levels and other health-related concerns are on the rise, including the incidence of lifestyle diseases. We must take precautions and prepare ourselves for potential medical emergencies. The best way to deal with such curveballs is a health insurance plan. Health insurance policies help you with the cost of treatment, leaving you and your family members to focus on recovering and getting better.

Advantages of purchasing a Health Insurance Plan

• Coverage against Medical Expenses

  You never know when a critical medical emergency could affect you or a loved one. Health insurance plans offer coverage against high medical costs. Instead of worrying about mounting hospital bills, you can focus on your speedy recovery.

• Cashless Claim Benefit

  Almost all health insurance providers offer cashless claims. You can get treatment in the insurance company’s network hospitals without settling the bill yourself. Instead, the insurance provider settles the covered amount directly with the hospital. You only need to pay the mandatory deductible and for uncovered expenses.

• Helps Deal with Medical Inflation

  India recorded a medical inflation rate of 14% in 2021, the highest rate across Asia¹. Hospital costs are rising consistently, and dealing with a medical emergency could wipe out your savings and leave you in debt. A health insurance policy allows you to deal with inflating medical costs without breaking the bank.

• Tax Benefits under Section 80D

  Section 80D of the Income Tax Act allows taxpayers to claim deductions for the premiums paid for health insurance policies and their medical expenditures. There are certain limits on the amount taxpayers can claim for policies for themselves, their spouse, dependent child, and parents in a financial year. Let’s take a look:

*Of the limits specified above, payments made towards preventive health check-ups of self, spouse and dependent children shall not exceed INR 5,000 in a financial year. An equal amount of INR 5,000 shall be available for the individual’s parents as well.

**Deduction of medical expenditure incurred can only be claimed if the person on whom expenditure is incurred is not covered under any health insurance plan.

Essential Points to Note

• Premium payments can be made online or offline but cannot be made in cash. Cash payments are allowed for preventative health check-ups.

• The higher limit of INR 50,000 per year can be claimed instead of INR 25,000 per year when the insured is a senior citizen, which means they are over 60.

• The higher deduction limit is not available to senior citizens who are non-residents.

• In case a member of the HUF is over 60, the deduction limit on insurance premium payments increases from INR 25,000 to INR 50,000.

Documents Required to Claim Deductions under Section 80D

If you want to claim deductions against Section 80D, you must do so while computing your taxable income for the year. Currently, the Income Tax Department does not require you to submit documents as proof when you claim the deduction. However, it’s a good idea to maintain a file of payment receipts and policy documents. You can furnish the documents to your employer or the Income Tax Department if there’s any enquiry.

Every sound financial plan includes a health insurance policy. You can rely on your health insurance to help you during a medical emergency. Additionally, you can enjoy benefits under Section 80D^# of the Income Tax Act.

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ARN - ED/07/22/28149