How your health insurance plan will help save tax this 2017-2018
How your health insurance plan will help save tax this 2017-2018
Many financial products offer tax benefits that can be claimed at the end of the fiscal year. Your health insurance policy, too, can help save taxes and bring you the returns you desire.
Reported by: India TV Business DeskNew DelhiPublished : Feb 01, 2018 17:23 IST, Updated : Feb 01, 2018 17:23 IST
The time to file your tax is right around the corner. Most of you would want to save taxes and reap in maximum benefits from the plans and policies you possess. Many financial products offer tax benefits that can be claimed at the end of the fiscal year. Your health insurance policy, too, can help save taxes and bring you the returns you desire!
A quick look at how health insurance plans work
A health insurance policy is provided by the insurance company that helps pay your hospital bills and other medical expenses. Health insurance companies in India either offer cashless hospitalisation of the insured wherein the insurance company pays all hospital bills, or provides a reimbursement option wherein the policyholder pays for the medical expenses and submits the bills to the insurance company which will later reimburse the amount.
Policyholders choose a certain amount known as the sum insured up to which the insurance company is liable to pay the insured in times of medical need. The policyholder will have to pay a nominal amount called the premium towards the sum insured, regularly, as agreed upon with the insurance company.
The insured individual can avail tax benefits for both health insurance policies and Mediclaim policies, under section 80D of the Income Tax Act, 1961. More on this in the next section.
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Under what conditions can deductions be claimed
● Premiums and Preventive Health check-ups: According to section 80D of the Income Tax Act, an individual or a HUF (Hindu Undivided Family) can claim payments made towards:
o health insurance premium paid by an individual or a HUF.
o contribution by an individual to the Central Government Health Scheme or any such scheme that may be notified by the Central Government.
o sum paid by an individual for preventive health check-ups.
o medical expenses incurred by an individual or a HUF for a very senior citizen, provided he/she has no health insurance cover.
● Disabled dependents: Under section 80DD, an individual or a HUF can claim deductions arising from the maintenance of a disabled dependent. The deductions made should be towards:
o expenses incurred on the treatment, rehabilitation and training of the disabled dependent.
o payment made or amount deposited under an LIC scheme or a scheme by other insurers, UTI or a specified company approved by the board for the maintenance of the disabled dependent.
● Treatment of specified diseases: As per section 80DDB, the taxpayer can claim deductions if expenses were incurred in the treatment of certain specified diseases.
Amount of deduction that can be claimed
● Under section 80D
o a maximum of Rs.25,000 can be claimed for the payment of health insurance premium or payment of preventive health check-up. In the case of a HUF, the amount that can be claimed for premium payment can be increased to Rs.30,000 if the premium is paid for a senior citizen, or if medical expenses are incurred for a very senior citizen who does not hold a health insurance plan.
o a maximum of Rs.25,000 can be claimed for contributions made to the Central Government Health Scheme or any such scheme notified by the Central Government.
o a maximum of Rs.30,000 for expenses incurred for medical treatment of a very senior citizen who holds no health insurance policy.
● Under section 80DD
o an amount equal to Rs.75,000 can be claimed if expenditure was made for the disabled dependent.
o an amount equal to Rs.1.25 lakh can be claimed if the dependent suffers from severe disability.
● Under section 80DDB
o a sum of Rs.40,000 or the actual amount paid for the treatment of the specified disease, whichever is lesser, can be claimed.
o a sum of Rs.60,000 can be claimed if the expenses incurred were for the treatment of a senior citizen.
o a sum of Rs.80,000 can be claimed if the expenses incurred were for the treatment of a very senior citizen.
Points to keep in mind
● The deductions can be claimed only if the payments are made by any mode other than cash. The cash mode is applicable only for preventive health check-ups.
● Deductions can be claimed by individuals who have a medical insurance policy in his/her own name, his/her spouse’s name, his/her parents’ names or his/her dependent children’s names.
● In the case of a HUF, the policy may be in the name of any member of the HUF.
● A senior citizen is an Indian national who is 60-80 years old during the relevant period.
● A very senior citizen is an Indian national who is 80 years old or more during the relevant period.
● The total amount that can be claimed for preventive health check-up cannot exceed Rs.5,000.
● In the case of section 80DD, the taxpayer should have a copy of Form No. 10-IA issued by the medical authority. If the certificate has crossed the expiry date, a new certificate should be obtained.
● In the case of section 80DDB, the taxpayer should have a copy of Form No. 10-I issued by an oncologist, a haematologist, an immunologist, a neurologist, or any such specialist working in a government hospital.
Conclusion
Buying an insurance policy, be it life insurance or health insurance, can help one save money on income taxes. While a health insurance policy can help you save tax, the prime reason of the existence of the policy is to cover the medical expenses of you and your family during planned hospitalisations or emergencies. When you decide to purchase a health insurance policy, make sure you do a thorough research on the best health insurance plans available and pick the one that best suits your requirements.
