Health insurance is one of the most important requirements for a family today. With the rising costs of quality medical treatment, health insurance is one way to ensure the family savings are protected. Health insurance in India does not enjoy a lot of popularity because people consider it to be a dead investment since it does not show any return. However, it often times pays for itself especially in times of medical emergencies.
How does a health insurance policy work?
Under health insurance plans, a premium is paid to cover the cost of hospitalization. Pre and post hospitalization spends, doctor consultations, day treatments such as cataract surgeries etc., ambulance spends are included depending on the type of health insurance policy. In case a person has to be hospitalized, the insurance company can directly pay the cost of treatment up to the sum assured to the hospital. Health insurance companies generally tie up with hospitals to allow cashless treatment. In other cases, bills for medical expenses have to be submitted to the health insurance company and these are then reimbursed.
Tax benefits of health insurance plans:
Health insurance can protect a family’s savings from medical expenses. To improve the coverage of health insurance India gives an Income Tax deduction for premiums paid for health insurance plans. This deduction can be availed under Section 80D of the Income Tax Act.
This deduction is available in two parts:
• Health insurance plans taken for self, spouse, and dependent children
• Health insurance plans taken for parents of self or parents of spouse
The limit for each category is Rs. 25,000. However, if the parents are senior citizens, then this limit is increased to Rs. 50,000. If the policyholder himself or herself is a senior citizen, then the benefit is Rs. 50,000. Thus the maximum deduction available under this section is Rs. 1,00,000 in case both categories of health insurance plans are for senior citizens.
This deduction for health insurance policy is available if the premium is paid through the following modes:
• Credit or debit card
• Cheque
• Wallets/UPI
• Net banking or mobile banking
Thus any premium paid in cash is not eligible for a deduction under Section 80D of the Income Tax Act. Also, a health insurance policy purchased for any other relative or grandparents is not allowed as a deduction.
Any amount received under a health insurance policy for hospitalization or reimbursement of medical expenses is not chargeable to tax since it is treated as a reimbursement of medical expenses and not income. However, any receipt under Section 80D affects any deduction taken under Section 80DDB (deduction for medical treatment for specified diseases). It is important to read through the sections carefully while availing these deductions.
How does a health insurance policy work?
Under health insurance plans, a premium is paid to cover the cost of hospitalization. Pre and post hospitalization spends, doctor consultations, day treatments such as cataract surgeries etc., ambulance spends are included depending on the type of health insurance policy. In case a person has to be hospitalized, the insurance company can directly pay the cost of treatment up to the sum assured to the hospital. Health insurance companies generally tie up with hospitals to allow cashless treatment. In other cases, bills for medical expenses have to be submitted to the health insurance company and these are then reimbursed.
Tax benefits of health insurance plans:
Health insurance can protect a family’s savings from medical expenses. To improve the coverage of health insurance India gives an Income Tax deduction for premiums paid for health insurance plans. This deduction can be availed under Section 80D of the Income Tax Act.
This deduction is available in two parts:
• Health insurance plans taken for self, spouse, and dependent children
• Health insurance plans taken for parents of self or parents of spouse
The limit for each category is Rs. 25,000. However, if the parents are senior citizens, then this limit is increased to Rs. 50,000. If the policyholder himself or herself is a senior citizen, then the benefit is Rs. 50,000. Thus the maximum deduction available under this section is Rs. 1,00,000 in case both categories of health insurance plans are for senior citizens.
This deduction for health insurance policy is available if the premium is paid through the following modes:
• Credit or debit card
• Cheque
• Wallets/UPI
• Net banking or mobile banking
Thus any premium paid in cash is not eligible for a deduction under Section 80D of the Income Tax Act. Also, a health insurance policy purchased for any other relative or grandparents is not allowed as a deduction.
Any amount received under a health insurance policy for hospitalization or reimbursement of medical expenses is not chargeable to tax since it is treated as a reimbursement of medical expenses and not income. However, any receipt under Section 80D affects any deduction taken under Section 80DDB (deduction for medical treatment for specified diseases). It is important to read through the sections carefully while availing these deductions.
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