Our health is our most valued asset. However, it is unpredictable, which is why is it wise to get yourself and your loved ones' healthcare insured.
Health insurance not only helps you in unexpected medical crisis but helps you reduce your tax liability. The premium you pay on health insurances of yourself and your family members can be claimed for tax exemption.
Note that health insurance premium is not an investment but for the sole purpose of securing you from unexpected health circumstances and prevent you from paying rising hospital costs. It is therefore advisable to make an informed decision based on your requirements and not just for tax benefits.
Here are five things you should know about tax benefits on health insurance for the financial year 2017-18:
Tax benefit limit
Under section 80D of the Income tax Act, the premium you pay on your health insurance and your family qualifies for tax exemption upto a limit. This depends on the age of the beneficiary.
The maximum deduction is Rs 25,000 a year on the premium paid on the health insurance of those below the age of 60. The limit is Rs 30,000 for those over 60 years of age.
Family members include spouse, children and parents. It does not matter whether or not your parents or children are dependent on you.
If you (taxpayer) are less than 60 years of age and your parent is over 60, you can maximize your tax benefit to Rs 55,000 (25,000+30,000) under section 80D. If you are older than 60 and paying for your parent's health insurance, you can avail the combined tax benefit of Rs 60,000.
Today's lifestyle requires preventive health check-ups to avoid sudden health crisis. Many hospitals provide special packages for these preventive health check-ups.
Within the same Rs 25,000 or Rs 30,000 limit under section 80D, you can add your checkup expenses. For example, you have paid Rs 15,000 in premiums and Rs 3,000 on checkups, you are eligible for the whole Rs 18,000 (15,000+3,000) benefit limit.
Types of health plans
Both 'indemnity' and 'defined benefit' health plans qualify for the tax benefit. Indemnity plans are those which allows you to plan your own health and visit any doctor of your choice. These are popularly known as Mediclaims.
Defined benefit plan is based on pre-defined benefit amount or type of illness healthcare coverage.
Not limited to health insurance companies
Section 80D covers health insurance premiums but this is not specific to premiums paid only to health insurance companies. Premiums paid to a life insurance policy company with healthcare specific coverage (for example critical illness) is also applicable.
Cash payment of premiums is not allowed for tax benefits. You can pay using credit card, internet banking, draft or cheque to get the benefit.
You can however, make cash payment for preventive checkups.