Generally, people buy medical insurance for themselves and their families. It helps them ensure promising healthcare in times of emergency. In the bigger picture, health insurance provides relief when you have certain medical expenses ahead of you. However, the advantages of these policies can range from lowered hospital bills to tax reductions. A health insurance policy in India can be more beneficial than you think.
Taxpayers in India get relief in income tax when they provide proper documentation of their expenses. It should also include house rent details. Interestingly, health insurance is also one factor that can reduce the tax you have to pay. As per Section 80D of the Indian Income Tax Act, the total taxable amount of your overall income will be reduced. The amount of reduction will be as per the health insurance policy you have chosen for your family.
Though, this tax relief is subject to changes in income tax laws. Have you recently bought health insurance or are planning to do so? If yes, the following overview of medical insurance tax benefits will help you make the right decision.
Health Insurance Deduction as per Section 80D
This section was added to the income tax regulations of India during the 1980s. It later came into effect to offer mediclaim deductions on each premium. The core concept of bringing this section into effect was to raise awareness about health insurance. Moreover, it encourages people to invest their money in the right place.
There are different deduction rates for various types of health insurance policies. Taxpayers can be eligible for a minimum of Rs. 25,000 and a maximum of Rs. 1,00,000 tax deduction. This tax relief depends on the medical policy type of the taxpayer. Simply put, medical insurance tax benefits can save you a substantial amount of money that you can save for future purposes.
If your health insurance policy covers parents, spouses, and children, you can apply for a deduction in your existing tax amount. In addition, you can expect a bigger reduction rate if you have recently updated your policy or bought add-ons to your medical insurance.
How Much Can You Save with Health Insurance Tax Benefits?
Most people fail to benefit from their health insurance policy. People often splurge their money on paying taxes and buying health insurance policies. Many people are unaware of the applicable tax benefits per their health insurance deductions. In the following section, you will get a basic idea of how much you can save with your medical policies.
The income tax act of section 80D applies to health insurance coverage if your policy falls under the category of two prominent types. One of them is the policy you buy for yourself and your family. Another health insurance policy should be for dependent parents. Simply put, taxpayers in India are entitled to these benefits if they have purchased medical insurance for their families. It also applies if they have dependent parents.
Health insurance deduction is crucial for relief in taxable income.
Here’s a brief breakdown of how much money you can save on taxation with the right healthcare policy:
- The limit of medical insurance deduction is decided based on the age of the primary policyholder. The benefit will be the same even if your family insurance covers senior citizens.
- Health insurance benefits on income tax can be applicable even if the policy is for a single person or a family. This statement only includes wives/husbands and children. However, the tax reduction is higher when your health insurance covers dependent parents or senior citizens. You can leverage their policies only if you pay the premiums.
- If the age of the policyholder is less than 60 years, then the maximum deductible tax amount will be Rs. 25.000. On the flip side, the maximum tax relief on the policy will be Rs. 50,000 for policyholders above the age of 60 years.
- An undivided family is eligible for a health insurance tax deduction of Rs. 25,000. For this, the primary policyholder should be below the age of 60 years. On the other hand, the deductible tax will be Rs. 50,000 if the primary policyholder is above the age of 60 years.
- Non-residential Indians are also eligible for maximum tax relief of Rs. 25,000. It is possible if they have purchased a health insurance policy in India for their parents, a family member, or themselves. This eligibility doesn’t require any age limit for NRIs.
- This section also says that a preventive health checkup or PHC is possible only if you don’t qualify for the deduction limits we discussed earlier. The PHC limit is Rs. 5000 for policyholders below the age of 60 years. It is Rs. 7000 for policyholders above 60 years.
List of Documents You Will Need for Health Insurance Tax Benefits
Section 80D of the Indian Income Tax Act has some regulations. It entails that health insurance deduction will be applied to the taxation amount per policy. It should also cover the information of policyholders.
Your health insurance and the age of members involved in the policy can result in Rs. 25,000 tax benefit. It can also be Rs. 50,000, Rs. 75,000, and Rs. 1,00,000 as per the policy type.
Here is a list of documents and other requirements that you will need to claim tax relief from your health insurance:
- Receipt of the payment of the premium. If you have paid the premium online, don’t forget to download the online receipt from the website.
- The date of the receipt should have the same year for which you are paying the tax.
- You must remember that a cash receipt is not acceptable. Moreover, you cannot present the receipts given by insurance agents. Try not to use these slips for tax reduction claims.
In addition to Section 80D, you can also benefit from section 17. According to this section, you can benefit from recent health-related expenses from your income. Health insurance tax benefits in India can help you save a lot of money. Therefore, you should buy a medical insurance policy from a reliable provider.
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