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We have all been blindsided by unexpected medical costs at some point, right? That’s why, nowadays, getting a basic health insurance policy is widely believed to be more than just a good idea.
The insurance policy reimburses all your major hospital charges, and if the conditions are met, you receive cashless treatment. In exchange, you must pay the concerned insurance company a premium annually.
However, apart from expecting coverage enhancements and no claim bonus (NCB), there are also some associated tax advantages to a health insurance policy. Here, you can dig deeper into this topic and learn how to claim the benefits.
Also read: Did you know about these benefits of health insurance policy?
What is a Health Insurance?
Health insurance is a financial product that covers medical expenses incurred by the insured, offering protection against the high costs of healthcare services. It involves paying premiums to an insurance company in exchange for benefits such as coverage for doctor visits, hospital stays, prescription drugs, and other expenses.
Understanding the Tax Benefits of Health Insurance
As per Section 80D of the Income Tax Act 1961, an individual can file tax returns against the premium paid for a health insurance policy. The Government of India (GoI) allows such tax exemptions for health insurance owners to encourage more citizens to shield themselves from rising medical costs.
However, the maximum tax-deductible amount on yearly premiums has been capped at Rs.25,000. This tax benefit could rise to Rs. 1 Lakh for senior citizens and family health insurance plans. Eventually, as you can perceive, the final deduction amount depends on whether the plan was bought for self, family, or dependent parents.
Also read: How to figure out the right amount of health insurance for you and your family
Things to Consider While Claiming Tax Exemptions Under Section 80D
You should follow the three pointers mentioned below to avail health insurance tax benefits seamlessly:
- Avoid cash payments for settling premiums. You can either draw a demand draft or a cheque for the purpose. These days, many people decide to pay the insurer directly online, which is also accepted as valid proof of payment.
- You should responsibly maintain a copy of the insurance plan showing your premium payment. It is the most vital document supporting your deduction claim.
- It is crucial to understand that the policyholder’s present age plays a major role in determining overall tax relaxations. All individuals and Hindu Undivided Families (HUFs) are eligible for this scheme-specific tax deduction (singly or jointly).
Documents Required to Claim a Tax Deduction
All policyholders interested in filing income tax returns against health insurance premiums need to put forward the following papers:
- A copy of the premium receipt that was issued either offline or online
- A copy of the medical insurance policy
- A copy of the payment receipt/ document, i.e., the cheque or demand draft
Please note: Besides the basic health insurance premium amount, you can also claim tax exemptions on premiums for critical illness add-on covers.
Also read: Health Issues and Health Insurance Coverage
Some Key Exclusions to Keep in Mind
Remember that specific cases render the premium amount ineligible for tax benefits is better. Here are some of those scenarios:
- Those transactions do not attract tax benefits if a person pays the premiums for health insurance policies intended to protect their siblings, uncles, aunts, or relatives.
- Healthcare fees arising out of non-allopathic treatments like Homeopathy or Ayurveda do not allow individuals to claim a valid tax deduction.
- Medical treatment costs related to childbirth or a personal accident are also not eligible for tax advantages as per Section 80D.
Now, you have a much more vivid representation of how to assess tax benefits on premiums furnished for health insurance. The extent of relaxation ultimately depends on the policyholder’s health insurance type, age, and the premium paid.
So, you can disclose your other investments at the income tax office, especially if those details help you obtain even more tax deductions. But for such instances, you must substantiate these claims with valid documents for successful redressal.
