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Tax benefits from Health Insurance

Aarti was looking at different ways to save tax as tax season approached. At a seminar that her company conducted, she learned that she could get a tax benefit for investing in a health insurance policy for herself and her family. Like many others, she only know about Section 80C for investment-linked deductions. In fact, there are several other sections which Aarti can use to save tax and benefit her family.

A health insurance policy is one of the most important tools in a person’s life arsenal. With the cost of quality medical treatment rising, having adequate health insurance can ensure your savings are protected. There are different types of health insurance policies, and having one for yourself and your family will help manage medical treatment expenses.

Investing in a health insurance policy beneficial for your savings in more ways than one since you also get tax benefits. The government of India gives health insurance tax benefit for those people who invest in these policies. The government rule does not discriminate between different types of health insurance policies i.e Mediclaim or other policies. Any health insurance policy offered by any general insurance company in India can give you a health insurance tax benefit.

The health insurance tax benefit section is 80D of the Income Tax Act. Under Section 80D, premium paid to an insurance company for a health plan is allowed as a deduction. This section also gives a deduction to premiums paid to cover critical illness or terminal illness. The health insurance tax benefit 2018 is only allowed for individuals and Hindu Undivided Families.

The quantum of deduction depends on two factors:

• Who is the beneficiary of the insurance policy?

• Age of the insured

Beneficiary – Self, spouse, dependent children

The health insurance premium tax benefit is available for insurance premiums paid for self, spouse, and dependent children. These policies can be individual policies or it can be a family floater.

It is to be noted that the children must be dependent on the parents so that their insurance premium is eligible for deduction. Health insurance premiums paid for children who are not dependent are not allowed as a deduction for the parent. Therefore, it is better for independent children to get their own health insurance policy and avail the deduction.

The amount of deduction under this section is restricted to Rs. 25,000 in total. This means deduction available for health insurance premium is the actual amount paid or Rs. 25,000 whichever is lower.

In case the individual or his spouse is a senior citizen, this deduction goes up to Rs. 50,000.

Aarti can use these provisions to her benefit and get a comprehensive health insurance policy for herself and her family. The amount that she will be able to claim as a deduction will depend on the people covered in the policy.

Beneficiary: Parent of the individual

An individual can also pay health insurance premium for his or her parents and get a deduction under Section 80D. This deduction is over and above the deduction available to self and spouse.

For parents who are not senior citizens, this deduction is Rs. 25,000 or actual insurance premium paid, whichever is lower.

If the parents are senior citizens, this deduction is Rs. 50,000 from FY 2018-19 or the actual insurance premium paid, whichever is lower.

Some important points

• Insurance premium must be paid in any mode other than cash. Some of the acceptable means are cheque, demand draft, credit card, debit card etc. Premium paid in cash is not allowed as a deduction.

• Apart from the benefit of health insurance premium, any amount spent for a preventive health check-up up to Rs. 5,000 is also allowed as a deduction. This is included in the overall limit of Rs. 25,000/Rs. 30,000/Rs. 50,000.


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