Although buying health insurance has lots of benefits, like mitigating your financial burden when you fall sick and have to be hospitalized, many people buy health insurance solely for the purpose of availing the tax breaks that they get on the policy premiums paid. Nobody willingly falls sick, and with skyrocketing medical expenses, buying health insurance has become imperative, especially as the premium you pay on it can be totally deducted from your income tax burden.
What does health insurance cover?
Normally, a health insurance policy would have you covered for most of your medical expenses including room rent of the hospital and also surgery expenses. However, health insurance policies differ widely from company to company and from the type of policy, so it would be advisable for you to do your research first and then select the policy which suits your requirements best. Health insurance covers most ailments, but the norms for pre-existing diseases are very strict and full disclosure is mandatory if you wish to avoid complications later. Even maternity insurance coverage is provided by the insurance provider, but as an add-on, and would thus also be eligible for tax breaks under section 80D just as the regular health insurance policy.
Tax benefits under section 80D for health insurance
To make health insurance attractive for people, the government provides for deductions in income tax under section 80D of the Income Tax Act to the extent of premiums paid during the year on health insurance, including Maternity insurance coverage. There is a limit on such deductions, which can be availed in the slabs of Rs 25,000, Rs 50,000, Rs 75,000 or Rs 1 lakh.
- When you are availing tax breaks onhealth insurance premiums for self, spouse, and children, the limit is Rs 25,000.
- When you are availing tax breaks on health insurance premiums for self, spouse, children, and parents (all under the age of 60), the limit is Rs 50,000.
- When you are availing tax breaks on health insurance premiums for self, spouse, and children (all under 60) and parents (over 60), the limit is Rs 75,000.
- When you are availing tax breaks on health insurance premiums for self, spouse, children where the eldest member is over 60 and parents are also over 60, the limit is Rs 1 lakh.
So, if you have paid for medical insurance premiums within the limits mentioned above, you can deduct it fully from your tax liability, which can substantially reduce your income tax burden. Suppose you have paid Rs 21,000 on medical insurance premium during the financial year, you can straight away deduct Rs 21,000 from your tax liability.
Moreover, you can also claim tax breaks on the expenses you incur on preventive health check-ups. However, these expenses are not over and above the limits mentioned above but will have to be taken into account within the specified limits.
