How You Can Save Income Tax Legally with Health Insurance Policy

74 points
Health insurance policy
Image by kalhh from Pixabay

There is always a question that circulates in the mind of the policyholder that “why we should invest in health insurance”. The simple answer to this widely asked question is the number of benefits like tax benefits, cashless treatment expenses, emergency ambulance, etc. Obviously, everybody wants to earn and squeeze maximum profits from the money they invest in health insurance plans either in the form of monetary rewards or in the shape of medical benefits.

In this long summary of words, we are going to evaluate how a policyholder can obtain tax benefits or can save the maximum amount of tax in the annual payment of the income tax under section 80D of the Income Tax Act, 1963.

There are many health policies that are giving the proportionate amount of tax benefits and one of them is National Health insurance whose benefits, coverage system, terms, and conditions are planned by the Indian government.

Again, one more question uplifts into the head of the policyholder “Why only choose National Health Insurance company while planning to get medically insured?” It is because of the fact that National Insurance company has the claim settlement ratio of more than 100% that proves the credibility and faithfulness of the company towards the accomplishment of each claim.

How tax benefits are provided after the coverage period of National Health Insurance policy has started?

  1. Tax benefits will depend upon the premium paid for the sum insured chosen.
  2. The percentage of tax exemption will be based on the age of the insured who has purchased the policy.
  • Under 60 years: If the insured and the other family members included in the National Health Insurance is less than 60 years of age then the total deduction will be Rs 25,000. Also, if parents below 60 years are also included in the same policy then an additional Rs 25,000 is given.
  • Parents included are above 60 years: If the premiums are paid for the parents above the age of 60 years, then the insured will receive a maximum tax deduction of Rs 50,000. Additionally, if premiums are submitted for self, spouse, and children with the parents, then extra deduction of Rs 25,0000 is gifted. The gross tax benefit in this condition will Rs 75,000 per year.
  • If the self/ spouse is over 60 years: While purchasing National Health Insurance plan, the policyholder can receive up to Rs 50,0000 every year only if the self or spouse or children is more than 60 years of age and premiums are paid. Extra tax benefits of Rs 50,000 per year for inclusion of parents (above 60 years) under the same average. The total benefit amount that a policyholder can earn is Rs 1 lakh if such a situation emerges.
  • The deduction allowed on including senior citizens (over 60 years) can be utilized towards the medical expenses.

Let’s have a clear picture on how the tax exemptions are provided in National Health insurance illustrated through a table-

Health insurance CoverageMaximum Tax exemptions according to age of member includedTotal Tax benefit
For Self and familyRs 25,000Rs 25,000
For Self and family including parents (under 60 years)Rs 25,000 Plus Rs 25,000Rs 50,000
For Self and family including parents (above 60 years)Rs 25,000 Plus Rs 50,000Rs 75,000
For Self (above 60 years) and family including parents who are senior citizen (60 years or more)Rs 50,000 Plus Rs 50,000Rs 1 lakh

This mechanism is followed by all insurance companies to grant tax benefits to their policyholders.

In order to claim the tax benefit amount, the policyholder should maintain a record of premium paying statement and copy of Health Insurance policy document. The document must demonstrate the name, age, and relation of members included for tax savings. However, there are other important benefits of purchasing a National Health Insurance plan apart from tax savings such as timely claim payment for any kind of hospitalization of any illness, health checkup facility, medical second opinion for critical illness, Ayurveda and Homeopathy treatment etc.


Like it? Share with your friends!

74 points
Nirmalya Ghosh
Nirmalya has done his post graduate in business administration and now working as digital marketing executive in a US based firm. He loves to share the trending news and incidents with his readers. Follow him in Facebook or Twitter.