A solid financial plan starts with investing in a reliable health insurance policy. In fact, good health is considered to be the greatest wealth. So, before you start saving or investing to achieve your goals, availing of a health insurance policy is advisable.
Investing in health insurance entails a dual benefit of not only covering your medical costs but also helping you save on your taxes.
According to Section 80D of the Income Tax Act, 1961,health insurance tax benefit may be availed of by paying premiums towards health insurance policies for either yourself, your spouse or other family members. However, the amount of health insurance tax benefit depends on the age of the insured. As a policyholder, you may avail of a maximum deduction of INR 25,000 annually, depending on the amount of premium paid towards your policy. However, if you are paying a premium towards the health insurance policy of your parent or spouse who is above 60 years of age, you may avail of INR 30,000 as part of your mediclaim tax benefit. Therefore, if you are below 60 years and avail of insurance for yourself and also for your parents who are above 60 years, you may, as a taxpayer, may get a mediclaim tax benefit of up to INR 55,000.
Here are a few more things you should know about the Section 80D medical insurance benefits.
Amount of Tax Saved
If you avail of health insurance for either yourself or your family by paying a premium of INR 25,000, you save tax at the following rates.
- 10%, which amounts up to INR 2,575.
- 20% which amount up to INR 5,150.
- 30% which amounts up to INR 7,725.
Preventative Health Check-ups
As per the Section 80D medical insurance benefits, you may avail of an additional coverage benefit of INR 5,000 annually for any preventative health check-ups that you may undergo. In other words, if you are paying a premium of INR 20,000 towards health insurance and INR 5,000 towards health check-ups, you may avail of mediclaim tax benefits worth INR 25,000.
Tax Benefits on All Types of Insurance Policies
Be it an indemnity plan like individual health insurance or a Defined Benefit plan like a critical illness insurance plan, tax benefits could be availed of on all types of insurance policies. Apart from a critical illness insurance plan, the premiums paid towards riders on life insurance plans are also eligible for tax benefits, according to Section 80D of the Income Tax Act, 1961.
No Tax Benefit on Cash Payment
According to Section 80D, tax benefit can only be availed of if the premium payments are done via the Internet banking, cheques, drafts or credit cards. Apart from preventative health check-ups, no tax benefit is applicable for cash payments made against premiums.
It is advisable to avail of a health insurance plan as it not only ensures your finances are protected in case of a medical emergency but also helps you save on taxes.
