health-insurance-tax-benefit
By Okbima 11 Dec 2023 46

Tax Benefit of Health Insurance Plans In India

 

Health insurance tax benefits are incentives provided by the Indian Government to encourage individuals and businesses to purchase health insurance Plans. These benefits aim to make healthcare more affordable and accessible for taxpayers. Typically, individuals who purchase health insurance can deduct their premium payments from their taxable income, reducing their overall tax liability. 

Moreover, employers offering health insurance are eligible for tax deductions and exemptions for their contributions toward employee health coverage. These tax benefits not only serve to ensure that individuals have access to necessary medical care but also promote the overall well-being of the population by encouraging people to seek preventive healthcare and maintain overall health and wellness.

 

What are the Tax Benefits of Health Insurance?

Investing in health insurance not only provides crucial financial security during medical emergencies but also comes with significant tax benefits. The tax benefits on health insurance make it an important financial decision for individuals and their families.

Under Section 80D of the Indian Income Tax Act, health insurance premiums are eligible for tax deductions. This means that the amount paid towards health insurance premiums can be deducted from the individual's taxable income, thereby reducing the overall tax liability.

It's important to note that while health insurance offers tax benefits, these are subject to specific limits defined by the Income Tax laws. Individuals should stay informed about any changes in these laws to ensure accurate available tax deductions.

 

Health Insurance Income Tax Deductions: A Comprehensive Table

Let’s understand the Income Tax Deductions of Health Insurance with the help of the below table where we have mentioned all of the situations, and deductions amount.

 

Situations

Health Insurance Purchased For

Deduction for Insurance Premium Under Section 80

Claim Limit for Preventive Health Checkup

The amount of Mediclaim Deductions Available Under Section 80D

Self (below 60 years of age) + family

Self + Family

?25,000

?5,000

?50,000

Parents (below 60 years of age)

Parents

?25,000

?5,000

?50,000

Parents (above 60 years of age)

Parents

?50,000

?7,000

?50,000

Self (above 60 years of age) + family

Self + Family

?25,000

?5,000

?1,00,000

Parents (above 60 years of age)

Parents

?50,000

?7,000

?50,000

Hindu Undivided Family (HUF)

Either Self + Family or Parents

?25,000 or ?50,000

?5,000

N/A

Non-Resident Indians (NRIs)

Self + Family

?25,000

?5,000

?25,000


 

Tax Benefits in Health Insurance Section 80D of the Income Tax Act

Health insurance is a wise investment at any stage of life, offering an affordable option to protect oneself and family members from unforeseen medical expenses. Okbima provides a range of health insurance policies catering to diverse needs, including individual and family health insurance plans.

Among these, the MediCare policy offers coverage ranging from ?2 lakhs to ?20 lakhs, with additional features in policies like MediCare Premier and MediCare Protect, covering diagnostics, air ambulance services, bariatric surgery, and pre and post-hospitalization expenses. Family floater policies extend coverage to family members, ensuring comprehensive protection.

Hospitalization and medication costs can be a significant financial burden. Okbima health insurance policies reduce this concern, providing financial security in times of medical emergencies. Beyond the peace of mind offered by these policies, there's an additional financial benefit – tax deductions on the premium paid.

Under the Income Tax Act, Section 80D specifically allows deductions for health insurance premiums. This deduction applies to premiums paid for self, family, and dependent parents. For self and family (if senior citizens), along with separate health insurance for senior citizen parents, the maximum deduction could be up to Rs 1,00,000 per year.

 

Health Insurance Tax Benefit for Senior Citizens

For senior citizens aged above 60 years but below 80 years, Section 80D of the Income Tax Act provides significant health insurance tax benefits. These benefits are designed to ease the financial burden associated with health-related expenses during their retirement.

Under Section 80D, senior citizens can claim a tax exemption of up to Rs. 50,000 for health insurance premiums paid in each financial year. This deduction goes a long way in reducing taxable income, providing valuable financial relief specifically to the healthcare needs of seniors. In addition to the premium exemption, senior citizens can also claim a separate tax exemption of up to Rs. 5,000 for preventive health check-ups conducted during the financial year. 

 

Premiums Paid on Critical Illness and Riders

The premiums paid on family floater plans, which cover your spouse, children, and dependent parents, make you eligible for health insurance income tax deductions. Moreover, it's essential to recognize that the scope of health insurance tax benefits extends beyond the basic premium for the family floater plan. Additional insurance add-ons, often referred to as 'riders,' and critical illness cover incorporated into your existing policy are also eligible for tax deductions.

 

Preventive Health Check-ups

Regular preventive health check-ups play a crucial role in maintaining well-being by identifying the potential health risks before they appear. Beyond the health benefits, individuals can also avail themselves of health insurance tax benefits for preventive health check-ups.

Under the health insurance tax benefit scheme, you can claim a tax deduction of up to Rs 5,000 per year for preventive health check-ups for parents aged 60 years or below. If the parents are above 60 years, the limit for tax deduction increases to Rs 7,000.

 

How Much Health Insurance Tax Benefit Under Section 80D Can be Claimed by You?

The health insurance tax benefit under Section 80D of the Income Tax Act serves as a valuable incentive for individuals and families to secure comprehensive health coverage. Understanding the specifics of these deductions is crucial for maximizing the benefits. Here's a breakdown of the health insurance income tax deductions you can claim:

 

• Policy Types: Deductions are applicable for both individual/family floater policies and separate health insurance policies for dependent parents.

• Applicable Entities: Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) can also claim health insurance income tax deductions for policies purchased in India.

• Age-Dependent Limits: For policyholders below 60 years of age, the maximum deduction limit is Rs 25,000. For policyholders aged 60 and above (senior citizens), the maximum deduction limit is Rs 50,000.

• HUF Deduction Limits: HUFs can claim a maximum deduction of Rs 25,000 if the policyholder is below 60 years of age and  Rs 50,000 if the policyholder is a senior citizen.

• NRI Deduction Limits: NRIs can claim a maximum deduction of  Rs 25,000 (irrespective of age) for health insurance policies purchased in India for themselves or their parents.

• Preventive Health Checkup (PHC) Allowance: The PHC allowance is available if you do not meet the aforementioned deduction limits. For policyholders below 60 years of age, the PHC limit is Rs 5,000, and for senior citizens, it is Rs 7,000.

 

Mode of Payment of Health Insurance Premiums

The mode of payment for health insurance premiums plays a crucial role in determining eligibility for tax deductions under Section 80D. To qualify for these deductions, it's important to use specific electronic modes of payment. 

 

• Qualifying Modes of Payment: To avail of tax deductions on health insurance premiums, payments must be made through cheque, bank draft, or electronic modes such as credit or debit cards.

• Cash Payments Excluded: If you pay your health insurance premium in cash, you will not be eligible for mediclaim deductions under Section 80D. Cash payments are not considered for these tax benefits.

• Cashless Transactions: Opting for cashless transactions not only ensures eligibility for tax deductions but also aligns with the broader trend of digital transactions, providing convenience and record-keeping benefits.

• Exception for Preventive Health Check-ups: While health insurance premiums require digital payment modes, there is an exception for preventive health check-ups. Payments for preventive health check-ups made in cash still qualify for health insurance income tax deductions.

 

Factors to be Considered while Choosing a Health Insurance Plan

Finalizing a health insurance plan is a crucial decision that involves considering various factors beyond just the health insurance tax benefits. Here are key factors while choosing the right health insurance plan. Here are some of the common personal factors that you should look at before claiming the health insurance tax benefit.

Personal Factors to Consider:

Here are some of the common personal factors that you should look at before claiming the health insurance tax benefit.

  1. Current Health Status: Identify your current health condition, existing illnesses, and any hereditary medical conditions. Consider your lifestyle habits and potential health risks.
  2. Cost of Treatment: Check for the cost of treatment for common illnesses relevant to your lifestyle, such as coronary bypass surgery or knee replacement. This ensures that your coverage aligns with potential medical expenses.
  3. Post-Hospitalization Expenses: Check for coverage of post-hospitalization expenses, as recovery costs can extend beyond hospital stays.
  4. Preferred Medical Facilities: Consider the availability of your preferred medical facilities in the insurer's network of cashless hospitals.
  5. Annual Income: Align the coverage amount with your annual income, with a baseline of not less than 50% of your income.
  6. Healthcare Needs of Family Members: Identify the specific healthcare needs of your family members, and consider a family floater policy with adequate coverage.

 

Insurance Policy and Provider Factors to Consider:

Below are some of the common Insurance policy and provider factors that you should look at before claiming the health insurance tax benefit.

  1. Claim Settlement Ratio: Look for the claim settlement ratio and the ease of the claim settlement process of the health insurance provider.
  2. Coverage Details: Review the list of illnesses, procedures, and medical conditions covered under the policy.
  3. Waiting Periods: Understand waiting periods for specific illnesses as prescribed in the policies.
  4. Network of Hospitals: Check the network of cashless hospitals covered by the insurer, ensuring your preferred medical facilities are included.
  5. Coverage Details: Examine the expenses covered under the policy, including pre and post-hospitalization, room rent, ambulance charges, and alternative medicines.
  6. Riders and Top-Up Options: Identify the availability of riders, top-up premiums, or additional plans to enhance coverage.
  7. Entry Age: Consider the minimum and maximum age of entry for the policy.

 

Documents Required to Claim Health Insurance Tax Benefits under Section 80D

When claiming health insurance tax benefits under Section 80D, it's crucial to provide the necessary documents as proof to ensure a smooth and accurate deduction. Below are the some essential documents required:

 

  1. Premium Payment Receipt: The full receipt for the payment of the health insurance premium is a critical document. This receipt should display details such as the date of payment, the premium amount, and the mode of payment.

  2. Online Receipt: If you made the payment online, a receipt downloaded from the insurer's website is acceptable as proof. Ensure that this receipt includes all relevant information regarding the premium payment.

  3. Financial Year Relevance: The date on the premium payment receipt should fall within the financial year for which the tax is being computed. This ensures that the deduction is valid for the specific assessment year.

  4. Details on the Receipt: The receipt should specify the date on which the premium was received, the amount paid, and the mode of payment. Having all these details ensures that the claim is accurate and aligns with tax regulations.

  5. Mode of Payment: Cash receipts for premium payments will not be allowed as valid proof for claiming tax deductions. Ensure that the payment mode is mentioned on the receipt.

  6. Exclusion of Temporary Receipts: Temporary receipts provided by agents cannot be used to claim a tax deduction. Ensure that the receipt used for claiming deductions is an official document provided by the insurer.

 

 How to Claim Tax Benefits on Health Insurance Policy?

Claiming tax benefits on a health insurance policy involves a straightforward process during the filing of your Income Tax Returns (ITR). Below is the step-by-step guide on how to claim tax benefits on health insurance premiums.

• Access Deductions Section: While filing your ITR, navigate to the 'Deductions' column.

• Select Section 80D: Under the 'Deductions' column, choose Section 80D to claim tax deductions on health insurance premiums.

• Deduction Criteria: Select the appropriate criteria based on your coverage such as Self and Family, Self (Above 60 years), and Family.

• Attach Required Documents: Attach required documents, such as the premium payment receipt, to substantiate your claim. This document provides the necessary proof for the Income Tax Department to identify your claim accurately.

• Payment Mode Consideration: Ensure that you have paid the health insurance premium through eligible modes, including net banking, debit or credit card, cheque, or demand draft. Cash payments are not eligible for tax benefits.

• Review and Submit: Review the information entered, confirm the details, and submit your ITR with the claimed tax benefits.

 

Reasons to Buy the Health Insurance Policy from Okbima

Okbima is a prominent online insurance company that offers a wide range of insurance products, including health insurance. There are several compelling reasons why individuals may choose to buy a health insurance policy from Okbima which are mentioned below.

  1. Comparison of Multiple Plans: Okbima allows users to compare various health insurance plans from different providers. This comprehensive comparison helps individuals make an informed decision by checking their features, coverage, and premiums.

  2. Wide Range of Options: Provides access to a diverse range of health insurance policies catering to different needs and preferences. This ensures that individuals can find a policy that aligns with their specific requirements.

  3. User-Friendly Platform: The online platform of Okbima is user-friendly and easy to navigate. Users can explore, compare, and purchase health insurance plans seamlessly, making the entire process convenient and efficient.

  4. Transparent Information: Okbima is known for providing transparent and detailed information about each health insurance plan. Users can access policy details, terms and conditions, and coverage transparently, facilitating an informed decision-making process.

  5. Expert Guidance: Okbima offers expert guidance through customer support services and online resources. This assistance can be valuable for individuals who may have questions or need clarification while navigating through the insurance options.

 

Confused About Health Insurance? Ask Our Expert

 

How to Renew the Health Insurance from Okbima?

Renewing a health insurance policy with Okbima is a straightforward process that can be completed online in just a few simple steps. With Okbima you will get comprehensive coverage at the best price with great customer service. Here is a step-by-step guide on how to renew your health insurance policy with Okbima:

 

Step 1: Review your current policy, Identify your coverage needs, and prepare the necessary documents such as proof of identity, proof of address, proof of income, and medical history.

Step 2: Once the documents are completed, visit the Okbima website, and click on the “Health Insurance” icon on the homepage.

Step 3: On the “Health Insurance” page, fill in the required details such as your name, mobile number, email ID, coverage, and location.

Step 4: After providing the required details, Okbima will display different policy options for you to compare with their coverage and premiums.

Step 5: Now, review the policy options, choose the policy that best suits your needs, and complete the payment process.

Step 6: Once payment is completed, you will get the health insurance policy details on your email ID.

 

Conclusion

In conclusion, the health insurance tax benefit provides a significant financial advantage for individuals and families. Allowing individuals to deduct their health insurance premiums from their taxable income, reduces their overall tax liability and increases their disposable income. 

This benefit not only helps individuals afford quality health insurance coverage but also incentivizes them to seek and maintain coverage. Moreover, it encourages individuals to take responsibility for their own healthcare needs and ensures that the burden of medical expenses is shared by the larger population. 

 

FAQs

Can you avail of health insurance tax benefits under Section 80D?

Yes, individuals can avail of health insurance tax benefits under Section 80D of the Income Tax Act for premiums paid, promoting financial well-being and healthcare coverage.

 

What are the health insurance income tax deduction limits for senior citizens/parents?

Senior citizens/parents enjoy higher deduction limits under Section 80D, with a maximum of ?50,000, providing added financial relief for their health insurance premiums.

 

Who receives health insurance tax benefits under Section 80D? Am I eligible to avail of tax deduction under the Section?

Any individual, including taxpayers and Hindu Undivided Families (HUFs), can claim tax benefits under Section 80D by paying health insurance premiums for themselves, their family, or their parents.

 

What are the critical factors to remember when claiming a health insurance income tax deduction under Section 80D?

Ensure accurate documentation, declare premiums under the specified limit, and understand the distinctions in deduction limits based on age and type of coverage for successful claims.

 

How do I claim tax exemption under Section 80D of the IT Act for preventive health check-ups?

Section 80D allows deductions for preventive health check-ups within the overall limit. Preserve bills and receipts to claim deductions, supporting a proactive approach to healthcare.

 

What documents are required to be submitted to avail tax benefits on health insurance premiums?

Submit premium payment receipts, policy documents, and details of insured members while filing income tax returns to substantiate claims and ensure a hassle-free tax benefit process.

 

Can I claim tax benefits from more than one medical insurance policy?

Yes, individuals can claim tax benefits from multiple health insurance policies, covering diverse aspects of healthcare. Aggregate premiums are paid for deductions, adhering to specified limits.

 

Who can claim tax benefits under Section 80D deduction?

Any individual, whether self, family, or HUF, can claim tax benefits under Section 80D. This inclusive provision supports a wide range of taxpayers, fostering a culture of health insurance.

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