As we approach the end of Financial Year 2020-21, tax-saving season is at its peak. We are all trying to figure out the best ways to save up on our income tax. So, how does an individual taxpayer get the most out of their taxes? If we are to follow the advice of financial experts, one sure-shot way of becoming tax efficient and saving money is by getting adequate health insurance cover for ourselves and our family. Apart from providing us with financial security during medical circumstances, health insurance plans significantly reduce our taxable income and thereby our tax liability. However, to drive optimum rewards through health insurance, understanding Section 80D of the Income Tax Act is critical.
Under Section 80D of the Income Tax Act, 1961, we can avail deduction for health insurance premium paid for self, spouse, dependents, children, and even parents. However, what are the exact tax deductions that we should be expecting to receive if we are paying health insurance premium for ourselves and/or for other members in the family? We clear the confusions ahead.
How does Section 80D work?
In simple terms, Section 80D lowers a person’s tax liability by reducing their taxable income. For example, the health insurance premium that you are paying for yourself and/or for other members of the family will be subtracted from your taxable income. It won’t be deducted from the overall tax amount that you will have to pay. Further, the quantum of tax benefits offered by Section 80D is also dependent on the age of the person insured. There are three ways how Section 80D works in this regard:
You can claim a deduction of Rs.25,000 under section 80D on insurance for self, spouse and dependent children. An additional deduction for insurance of parent(s) is available up to Rs 25,000, if they are less than 60 years of age, which takes the total deduction to Rs 50,000.
If the parents are aged above 60, the deduction amount is Rs 50,000. In this case, you can claim a total deduction of Rs 75,000 from which Rs 25,000 is on the premium paid for self, spouse and dependent children and Rs 50,000 on the premium paid for senior citizen parent(s).
If both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section goes up to Rs.1 lakh (Rs 50,000+Rs 50,000).
Additional benefit of Rs 5,000 with health check-ups
Further boosting Section 80D’s tax saving benefits are health checkups. Helpful in detecting several diseases at an early stage, regular preventive health checkups can go a long way in protecting you from lifestyle ailments and many leading healthcare companies or hospitals provide extensive packages to keep your health in check. The good news is that preventive health checkups also facilitate a deduction of Rs 5,000 from your income tax liability. For instance, if you are paying a health insurance premium of Rs 25,000 per annum for a mediclaim policy, and have opted for a health checkup for yourself, or for your parents/spouse/dependent children during the financial year, you can avail a total deduction of Rs 30,000 on your income. This additional benefit offered by Section 80D is thus a good way to smartly manage your income tax.
Inclusive of both fixed benefits and indemnity based health insurance policies
Now, one might wonder how Section 80D tax benefits might work for indemnity-based plans and defined benefit plans- the two popular forms of health insurance in India. For this, one needs to understand how these two plans work. An Indemnity Plan is a form of health insurance plan that reimburses the actual expense incurred during hospitalization up to the predefined limit under the scheme. The amount that is reimbursed depends on the sum insured by the policyholder, which is the maximum amount of claim that the insurer reimburses subject to the policy conditions.
On the other hand, defined benefit plans are a type of health insurance cover designed to provide financial safety against predefined events, like a critical illness. Here, the entire sum insured gets paid to the policyholder if a predefined ailment sets in. The benefits of Section 80D, however, are applicable to both the plans.
Whether you are paying health insurance premium for an indemnity based plan (individual mediclaim policy, family floater plan or a senior citizen plan) or a defined benefit plan ( critical illness insurance , hospital daily cash plan), you are eligible to get the same amount of income tax deduction through Section 80D. Thus, you can customize your health insurance policy depending on your requirements and remain worry-free on the income tax aspect as well. You also have the flexibility to choose the best policy for yourself from any reputed general insurance company or health insurance company to avail these tax benefits. Further, if you have subscribed to medical insurance or critical illness riders within your life insurance policy, you can claim the 80D benefits for that premium too.
What to look for while buying health insurance?
Considering health insurance is vital to smoothly tide over a range of medical contingencies and to also avail substantial tax benefit, it is also important to choose your policy from a reliable health insurance company. Currently, Bajaj Allianz General Insurance Company is one of the most popular health insurance providers in India. Over the years, it has been constantly enhancing and diversifying its plans so that people can avail health insurance at affordable rates. From critical illness plans to family health insurance, Bajaj Allianz has curated its plans keeping in mind the rising cost associated with medical care in India and provides many benefits like:
Cashless claims facility at over 6,500+ hospitals across the country
Cashless claim settlement within 60 minutes
Maximum coverage at affordable rates
Access to better medical care with a wide range of network hospitals across India
Quick claim settlement
Easy purchase and renewal of policies
In-house Health Administration Team (HAT) for faster claims processing
24×7 call assistance for claims settlement and other health insurance related queries
Bajaj Allianz is determined to make sure that you get your money’s worth at every stage. This convenience gets a further boost with Section 80D’s tax benefits. You can also use a health insurance premium calculator online to calculate the premium for your insurance needs.
Strengthen your family’s health portfolio with Health Guard Policy and Critical Illness Insurance Policy
To encourage positive health insurance habits among people, Bajaj Allianz General Insurance offers unique plans. The first one is its Health Guard Policy, which basically comprises health insurance plans for the entire family. The Health Guard Policy provides you with comprehensive family health insurance and multiple benefits ensuring the entire family is covered for the larger expenses related to illnesses or surgeries.
The second one is the Critical Illness Insurance Policy for the entire family. This policy is designed to protect you and your family against the financial burden of major life-threatening conditions such as cancer, organ transplant, heart attack, etc. Considering the cost of medical aid is soaring along with the incidence of critical illnesses, this policy encourages people to equip themselves with a health insurance policy that covers critical illnesses. These illnesses may lead to the unemployment of a family’s sole earning member and the insurance payout can be used for various purposes including as an income replacement. With these two plans, you can make the best decision for yourself and your family and stay secured at all times.
Although buying a health insurance policy is not a financial investment at face value, it can go a long way in protecting you against unfortunate events that can lead to major monetary losses. Also, with the benefits of Section 80D, health insurance certainly gives you a scope to significantly lower your tax liability. It’s time you choose the right health insurance plan for yourself and your family and make your way towards financial freedom. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
Source : Times of India