Why get health insurance? – An alternative suggestion alongside defending health

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Health insurance is something that most of the people ignore today. People today just ignore having health insurance for several reasons. For example in India, health insurance is costly and it is not affordable for lower-middle-class people. But increasing healthcare costs make a big hole in your pocket. Paying for small health insurance premium can be the best way to lower your financial losses and gain peace of mind. We just cannot blame the people, it’s also the communication channel is not proper.

Is health insurance a must for everyone?

Health insurance is surely a must for everyone as with age, health problems of people increase and their income reduces greatly. Hence, health insurance policies for people especially senior citizens are necessary due to huge medical cost these days and it could empty the savings that they made for personal expenses.Under health insurance, the investor has to pay regular premiums to the insurer in return for which the insurer promises to cover him financially in case of a medical contingency. But the benefit is not just restricted to reimbursing the individual for the expenses he/she incurs on his/her medical treatment.

Health insurance as a tax saving tool

A health insurance scheme works as an efficient tax saving tool. The tax benefit can be taken for self, spouse, children, and parents. Interestingly, it does not matter whether the children or parents are dependent on you or not.

So, avail health insurance and save yourself from worries of hospitalization because there is not just medical benefit, but it also saves your personal tax liability for the premium incurred by you. In fact, you can claim an expense for not just yourself, but for your family as well. A substantial deduction is provided under Section 80D.

Why section 80D of IT Act very important for health insurance

According to Section 80D of the income tax act 1961, the premium paid to keep in force an insurance on the health of an individual, his/her spouse, dependent children are allowed to be deducted from gross total income. The upper limit for this deductible amount is up to a maximum of Rs 25,000. A further deduction of Rs 25,000 in case the premium is paid for the health for the health of parents( less than 60 years old).

An Additional deduction of Rs 50,000 ( instead of 25,000) shall be available in case any of the persons mentioned above is a senior citizen i.e more than 60 years of age. Thus, it enables an individual to enjoy a maximum deduction of Rs 75,000 from the taxable income. In rare cases, the age of both the proposer and his parents is above 60 years. The deductible amount in such cases extends up to Rs 1,00,000 (Rs 50,000 + Rs 50,000)

The most important feature of every health insurance policy is that it allows you to take the tax deduction for premium payment of our spouse, children, or parents. You also get additional coverage for your family. But one must go for that health insurance policy that would serve him or his parents better medical conditions instead of just looking for a higher tax benefit. This will surely help you to get the maximum benefit of health insurance policy.

Saving taxes through various benefits provided under section 80D of IT Act

There are 5 important things to know about the tax benefit of health insurance plans.

  1. As per Section 80D, you can avail the tax benefit on premium paid for the health insurance for your parents. The benefit is available irrespective of the fact that your parents are dependent on you or not.
  2. As per new amendment in budget 2019, you would be allowed to avail the tax deduction up to Rs 50,000(including preventive health checkups annually), based on the premium payment made by you for health insurance of your parents and they are senior citizens ( more than 60 years old)
  3. In case your age is 60 years or above and you pay the premium for a health insurance policy of yourself and any of your parents (who must be senior citizens too), you can avail tax exemption up to Rs 1,00,000.
  4. As per Income tax act, you can avail tax exemption up to maximum Rs.5000  for expenses such as preventive health checkups of you, your parents. Remember, this is not over and above the individual limits as explained above.You can incur this expense in cash also.
  5. In case you take medical treatment for your parents who are the super senior citizen, that is there age is 80 or above, then you are eligible to avail tax deduction up to maximum limit Rs 50,000.

Let us see the tax benefits on health insurance premium in a table

Practical Scenario Tax deduction on the Premiums Paid Allowance for Preventive Health Check-up (Allowed in cash) Maximum Deduction
In case no one in your family has attained 60 years of age Rs 25,000(for self) + additional 25,000(parents) Rs. 5,000 Rs 50,000
In case your age is less than 60 years or above and your parents are senior citizens (more than 60 age) Rs. 25,000 (self) + 50,000 (senior citizen parents) Rs. 5,000 Rs 75,000
Where you and your parents’ age exceeds 60

 

You have incurred medical expenses for very senior citizen (above 80 years old)

Rs50,000 (an eligible senior citizen)+50,000 (senior citizen parents

 

Rs 5,000

 

 

Rs1,00,000

 

 

Rs 50,000

 

Conditions to claim to get benefits of section 80D

Individual or Hindu Undivided Family can claim deduction under section 80D. Corporate and firms are out of the scope of Section 80D. Further, the deduction is allowed only if the payment of insurance premium is made through any mode other than cash.

What other benefits of Health Insurance?

  • No need to pay for your hospitalization- i.e cashless health insurance is available at networked hospitals of insurance companies.
  •  Allied benefits- Free consultation with doctors, discount coupons on health care services.

Other health-related deductions available under income tax act

  • Section 80DD- An individual salaried person can claim deduction under this section. All expenses on treatment of disabled dependent are allowed.This includes expenditure on medical treatment, training, rehabilitation of the dependent disability. The tax-deductible amount is Rs 75,000. For severe cases, the deduction allowed shall be Rs 1,25,000.
  • Section 80DDB- The expenses incurred by an individual on the treatment of critical diseases (as given below) is tax deductible. A sum of Rs 40,000 is allowed as the deduction to those who are aged below 60 years. And Rs 1,00,000 for those who are above 60 years. This is as per budget 2019. Diseases covered under section 80DDB are Malignant cancers, Dementia, AIDS, Parkinson’s disease, hemophilia, thalassemia and chronic renal failure.
  • Section 80U- If an individual himself is suffering from a disability, then he gets the flat deduction of Rs 75000/125000 u/s 80U depending on the normal or serious disability. In order to claim deduction under this section, one has to fulfill legal formalities like getting a certificate from a recognized medical authority.

Conclusion!

You must get yourself insured with health insurance. Not only because it protects you and your family against unanticipated events in case of medical emergency but also to save taxes. You always consider the coverage and benefits of the health policy for your parents. With the increase in hospital costs, buying a health insurance is a win-win situation for you and especially for your parents.

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