An effective risk mitigating tool that hedges you financially against rising health care expenses, health insurance is a modern-day need. Apart from reimbursing hospitalization costs, up to the sum insured, a medical insurance policy also provides various tax benefits. While it’s well-known that you can claim tax deductions up to Rs. 25,000 on health insurance premium paid for self, spouse and children, here are some lesser-known tax sops offered by a health insurance policy.
Tax benefits on premiums paid for your parents below 60
Health insurance tax benefits are also applicable for premiums paid for parents below 60 years of age. If you pay health insurance premium on behalf of your parents, you can claim a maximum deduction of Rs. 25,000 under section 80D of the Income Tax Act,1961. So, the combined benefit you can claim in a fiscal, in case you pay medical insurance premiums for your parents, is up to Rs. 50,000.
Extra benefit if either parent is above 60
In the Union Budget 2018, tax benefit on health insurance premium paid for senior citizen was raised from the earlier Rs. 30,000 to Rs. 50,000. Therefore, in case either parent is above 60, the maximum tax benefit that can be claimed on health insurance premium paid is up to Rs. 50,000. This pushes total deduction up to Rs. 75,000 in a financial year.
If the eldest member of the family is above 60
Premiums for health insurance plans for family depend on the age of the eldest member covered by the policy. In case the eldest member covered by the policy is above 60 years of age, you can avail tax benefits up to Rs. 50,000 in a fiscal on medical insurance premium paid. Combining that with premiums paid for your senior citizen parents, the maximum deduction that can be claimed is Rs. 1 lakh.
Claiming deduction – Few essential lookouts
Note that for claiming deduction, you must pay premiums from your own pocket. In case the premium is paid by your employer or the government, you are not eligible for tax benefit(s). Employers offer group cover to their employees, the premiums of which are paid by them. Also, there are various government-backed health insurance schemes wherein the premiums are funded by the government.
Also, for claiming deduction you must keep the premium receipt and the policy copy showing the name of the family members, their age and relation with you. Tax benefits on health insurance are in addition to other relevant breaks offered by various sections of the Income Tax Act, 1961.
In case you pay the premiums at one go, tax benefits can be claimed for the number of years the policy offers coverage. Health insurance is generally an annual contract which needs to be renewed every year.
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