Health insurance for most people means an insurance company taking care of your medical bills and needs in a medical emergency, however one thing that most people do not know is that your health insurance policy can offer tax benefits for you and your family; and given the current state of the economy, money saved truly is money earned.
Want to know how your health insurance also provides tax benefits for you? here is how:
Health insurance comes under Section 80D of the IT act, 1961. What is it? Basically each individual or even Hindu Undivided Family (to learn more, Click here) can claim deductions from taxable income for health insurance premium payments in a given year. The best part is that these payments can be for insurances of your spouses or even dependent children.
What amount can be claimed annually?
- The deductions from taxable income allowed is at INR 25,000. In case of senior citizens this doubles to a hefty INR 50,000 which can amount to considerable savings for people in this category.
- Another major feature of the 80D is the provision for health check-ups. According to this, your family’s annual health check up bills can also be claimed under taxable income deduction under section 80D, giving you additional tax benefits.
- For example, if Anjali pays INR 20,000 for health insurance premium annually and spends on an average INR 6,000 on health check ups for herself and her family, she can add this up and get a total deductible income of INR 25,000 (her limit under Section 80D of the act)
Lump Sum payments are covered:
If you have chosen to pay the entire premium as a one-time lump sum payment, you will still get the tax benefits of this clause. Only thing is that your deductibles will be spread out over the course of your entire insured period.
For example, your Lump Sum premium is INR 100,000 for an insurance policy that covers you for 5 years. Hence, over the course of those 5 years you can claim (1,00,000/5= INR 20,000) as your income tax deductibles annually.
Exception for people with disabilities:
- In case you are taking care of a person with disabilities, your eligible income tax deduction goes up to INR 75,000 per annum.
- For expenditures incurred in rehabilitation, treatment, nursing, maintenance etc the total claim amount goes up to INR 125,000
Now that you have another incentive to go ahead and buy health insurance for your family, how do you pick the right policy? Which policy gives you the best bang for your buck while also ensuring smooth and hassle-free transactions when the unforeseen need to actually use the insurance policy arises?
Don’t worry we have got you covered, go to Picking the right health insurance to learn more.
Getting Tax Benefits from Health insurance - Frequently Asked Questions (FAQs)
1. Is opting for a policy that covers Outpatient costs advisable?
While most policies that cover OPD have very high premiums and might not save you any money on the bill payment front, they do offer excellent health insurance related tax benefits. This is because claims made under these for OPD services like dental, day care etc are liable for income tax deductions and do not have any TDS applicable on them.
2. What documents are needed to apply for tax savings through health insurance?
While the Income Tax department does not require any such submission of proof for these claims, it is recommended to preserve medical bills, premium payment receipts and policy documents for the sake of solid proof if at all it is asked for at a later date.
3. Who all are covered as family members under the act?
Only direct family, i.e. parents, spouse and children under the age of 25 who are not yet earning can be covered under the clause. Payments paid for aunts, uncles, siblings etc. will NOT add up to your deductibles.