​Income tax benefit up to Rs 1 lakh in health insurance plans: How much can you get?

By: |
January 27, 2021 2:05 PM

While buying a health insurance plan, there are several varieties of plans to choose from. Ideally, buy an individual health plan for yourself and family members.

MIC, Health insurance, Income tax benefit, health insurance plansAlthough tax benefit in a health policy is a fringe benefit, it gives you a way to minimize your tax liability and enjoy health insurance benefits as well.

The outbreak of the Coronavirus pandemic has brought the importance of health insurance to the forefront like never before. With the cost of hospitalization due to Covid-19 running into a few lakh, the health insurance policy has proven to be a boon to those who hold them. And, not just Covid-19, a health cover ensures you don’t have to dip into your savings to meet the rising medical costs because of any illness. A health insurance plan with adequate coverage is, therefore, a must-have for not just the eldest member but for the entire family. An illness or an accident leading to hospitalization may occur with anyone, anytime.
MIC, Health insurance, Income tax benefit, health insurance plans

Besides providing health insurance coverage, the premium paid also helps you to cut your tax outgo. Although tax benefit in a health policy is a fringe benefit, it gives you a way to minimize your tax liability and enjoy health insurance benefits as well.

The tax benefit that you can avail on the premium paid towards health insurance policy falls under section 80D of the Income Tax Act, 1961. The maximum tax benefit is capped at Rs 25,000 or Rs 50,000, however, the actual tax benefit will depend on your age. If you are below 60 years and buying health cover for yourself or for any family member who is also below 60 years, the maximum deduction allowed is Rs 25,000 in a financial year. Similarly, if you are of age 60 years or above, the maximum tax benefit is allowed up to Rs 50,000.

It means if you are 60 years or above and want to buy a health insurance plan for yourself and also for your parent, the total tax benefit can be availed up to Rs 1 lakh. The premium paid will bring your gross total income by an equal amount thus lowering your tax liability.

While buying a health insurance plan, there are several varieties of plans to choose from. Ideally, buy an individual health plan for yourself and family members but if you have a small family with kids, you may opt for a Family Floater plan. In a Family Floater plan, the sum insured (coverage) is common to all family members and not set individually. As not all members may get hospitalized at the same time, Family Floater plans help to maintain adequate coverage for all members yet pay a lower premium compared to individual plans. Over time, buying an individual health insurance plan or medical insurance plan is recommended as it helps to build a good claim history of the individual.

Further, there are Critical Illness plans which are benefit-based plans. In these plans, the entire sum insured is paid on the occurrence of ailments such as heart attack, paralysis, cancer, etc as specified in the policy document. They differ from medical insurance plans which are indemnity-based plans in which the hospitalization cost is re-reimbursed by the insurer up to the sum insured.

Finally, buying adequate coverage is the most crucial step. Get an estimate of how much coverage will be required before buying both these health covers, after all, you would not want to pay out-of-pocket even after buying them. Health covers are available in various forms such as riders (optional plans) or regular plans with any standalone health insurance company, general insurance company, or even life insurance company.

Both, the medical insurance plan and critical illness plan are equally important and should have a place in your health insurance portfolio to take on risks from all fronts. Even if Covid-19 has been a reason to buy health cover, consider it the best financial decision to get freedom from hospital bills and saving of taxes.

This article was originally posted here

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Sale of joint property at a loss: How to take maximum tax advantage
2When is the right time to hire a financial planner?
3Neither easy, nor friendly! Income Tax e-filing new portal continues to face glitches; some features yet not functional