We buy health insurance for the peace of mind that comes from knowing that the insurance company will take care of any unfortunate illness or unforeseen medical expenses in the family without our having to exhaust our savings. However there is yet another reason to buy health insurance: did you know you can avail significant tax benefits when you buy a health policy? Here is some information about the deduction and tax benefits of health insurance which you can claim on your policy, including the changes announced for the 2018-19 fiscal:
A way to Promote Health Insurance in the Country:
The reason that the government offers tax benefits for this kind of insurance is as an incentive to encourage more and more people to buy insurance policies to protect their health. Since health coverage is a relatively new concept in India vis-à-vis other types of insurance, there is comparatively lower penetration of health insurance in the country. Now with the available tax incentives and the convenience of buying online health insurance, people are more willing to go ahead and insure their own health and that of their loved ones.
Deduction under Section 80D of the Income Tax Act:
The relevant section of the IT act provides that any person or HUF (Hindu undivided family) can claim income tax deductions in respect of premium paid. This includes the policyholder, their spouse, dependent children and parents.
Policyholders can Claim Deductions for Self and Family:
When you buy health insurance for yourself, spouse and your dependent children, you can claim income tax deductions of up to Rs. 25,000/- on the total amount of tax payable. If your policy covers your parents who are not senior citizens, the deductible remains the same; i.e. Rs. 25,000/-.
Deductions for Dependent Seniors has Increased:
Previously the maximum deduction available was Rs. 60,000/- This limit has increased this year to a possible total of Rs 1 lakh if your health insurance policy covers senior citizens. Rs. 50,000/- exemption per senior citizen can be availed. Hence if you has a policyholder are paying the premium for the health policy of your parents; both of whom are senior citizens, you can claim up to Rs 1,00,000/- in tax deductions. You can also claim those deductions if you and/or your spouse are senior citizens and you are paying the premiums.
Tax Benefits of Health Insurance on Multi-Year Policy:
Many people are not opting for multi-year policies for reasons of convenience (policyholder don’t have to renew their policy each year) and because insurance companies sometimes offer attractive incentives (discounts) on multi-year policies. In the case of such policies as well, policyholders can avail tax benefits of Health Insurance. However the benefits would be divided over two or three years as per the duration of the policy. For instance, if a policyholder has paid one premium for a two year policy, they will be able to claim tax deductions over the two year duration (50% deduction each year).
With the sort of income tax benefits policyholders can avail; particularly in light of the recent enhancements in total deductibles, buying health insurance make even more sense. For this and several other reasons, you cannot afford not to have the protection of a health policy!