Investing in a robust health insurance plan is the best way to secure your loved ones’ future and foolproof your savings from unexpected expenses. Ensure adequate health insurance coverage for yourself and your family before focusing on long-term savings and investments. Health insurance is an absolute necessity as it not only provides coverage against medical emergencies but also lends a sense of security at all times.

In addition to these advantages, health insurance premiums promise tax benefits. It reduces your taxable income and thereby, tax liability too. Under Section 80D of the Income Tax Act, any premium amount paid for health insurance for self, family, and parents is allowed for an exemption. This is another reason why many financial advisors suggest taking health insurance before proceeding with other financial planning.

Understanding Section 80D of the Income Tax Act

It is never too early to get yourself a health insurance plan. It is the best way to safeguard yourself and your family against medical emergencies. There are different types of health insurance plans available in the market and you can choose one based on your needs.

The Tax Section of Section 80D of the Income Tax Act allows for tax exemption on premiums paid for health insurance. The deductions vary depending on your plan type and if it is for yourself, your family, or your senior citizen parents. The tax deduction for health insurance is substantial and can reduce a huge burden on your finances at the time of paying income tax.

Tax benefits of health insurance facts

Despite increased awareness regarding the numerous health and tax benefits of health insurance, some people are hesitant to invest in health insurance plans. If you are one of them, then here are some lesser-known facts that may change your mind.

1. Health insurance premiums

You are allowed to get tax exemption for premiums paid for not only individual health insurance plans but also for your spouse, child, and parents. The maximum deduction allowed is Rs 25,000 for policies purchased for self, spouse, and children, provided your family members are all below 60 years of age. In the case of a policy for a senior citizen, the maximum deduction allowed is Rs 50,000.

If you and your spouse are less than 60 years of age but your parents are above 60 years, then you are allowed to claim a tax deduction of up to Rs 75,000. Additionally, if you are over 60 years of age and your spouse and parents are also above 60 years, you can claim up to Rs 1,00,000 tax deductions.

2. Health check-ups

Your health checkups can help you avail of a benefit of up to Rs 5000 under Section 80D. This is allowed in case your maximum limit of exemption is reached. For instance, if you are paying a premium of Rs 22,000, you can claim additional benefits of health insurance for Rs 3,000.

3.Non-cash payment

It is important to note that health insurance premiums paid through cash payments do not qualify for redemption and tax benefits under Section 80D. To avail of these benefits, you must pay through cheque, demand draft, net banking, or credit card. So, getting health insurance plans for your family and yourself can not only help you with health-related expenses but also get you additional tax benefits.

4.Coverage for parents

Premium paid towards health insurance for parents is allowed exemption under Section 80D. This is irrespective of whether the parents are dependent on you or not. You can avail of these benefits depending on the age of the insured family member and hence, the amount of exemption may vary from person to person.

5.Add-ons in health insurance plans

As per Section 80D of the Income Tax Act, your tax exemption is not just restricted to premiums paid towards health insurance plans but also to additional riders that you take. For instance, if you opt for tops-ups, critical illness plans, and disability riders, the additional amount paid for this will be allowed for an exemption. This means that the policyholder is not only adding more protection toward unforeseen health expenses but is also getting tax benefits.

Exclusions in tax benefit

To avail of tax benefits of health insurance, the payment conditions must be met as per the ones mentioned under Section 80D. However, there are some exclusions when you cannot enjoy the benefits. These are:

• When the premium amount is paid in cash.
• The health insurance premium is not paid in the same financial year.
• The premium payment receipt is not available.
• The premium is paid by someone else on behalf of the policyholder.
• The premium is paid for in-laws, friends, or siblings.
• The deductions are claimed beyond the limits of the Act.

Hence, you must take adequate steps to renew your health policy within the same financial year and pay using only cheques and digital payment methods. Also, remember to keep the proof of payment document.

Factors to keep in mind when choosing health insurance

• Current age, present health conditions, pre-existing illnesses, hereditary conditions, and lifestyle habits.
• The present cost of treatments for common conditions such as knee replacement, gastrointestinal surgery etc.
• The cost of hospitalisation in your preferred medical facilities.
• Post-hospitalisation expenses.
• Your annual income.
• Age of insured family members.
• Health care needs of other family members vs. the premium amount of health insurance plans for parents

Conclusion

If you still have not purchased a health insurance plan for you and your family, then wait no longer. Invest in health insurance to enjoy security against medical contingencies and avail of tax benefits.