Understanding Health Insurance and Section 80D of the IT Act

Understanding Health Insurance and Section 80D of the IT Act

It’s hard to see your loved ones suffering from any medical emergency. These medical emergencies can surprise us at any time regardless of your age. That is why it is critical to recognize the significance of health insurance, no matter how healthy and fit you are, you never know what could be next. Today, lifestyle diseases are on the rise due to the unhealthy habits that most of us have. Therefore, when it comes to medical insurance, it’s always better to be safe than sorry.

In India, a vast majority of the population is still uninsured and relies on their savings or borrowings during any medical emergency. The government encourages everyone to have medical insurance which allows you to take advantage of tax deductions under Section 80D of the Income Tax Act. This makes it a must-have in your investment portfolio.

What is Section 80D of the IT Act?

Section 80D allows any individual or HUF (Hindu Undivided Family) to claim and deduct medical insurance premiums paid in any given year from their total income. Any top-up health insurance and critical health packages are also eligible for this deduction.

This advantage is accessible not just for purchasing health insurance coverage for yourself, but also if you are purchasing a policy that covers your spouse, dependent children, or parents.

Who is eligible for deductions under Section 80D of the IT Act?

For individual or HUF taxpayers, insurance can be availed for :

  • Self
  • Spouse
  • Dependant children
  • Parents

Individual health insurance and family floater policies are eligible for tax deductions under section 80D of the IT Act. Premiums paid for health insurance for self, spouse, dependent children or dependent parents are exempt.

If there is an unemployed male child under the age of 25 or any unmarried female child under the age of 25, both will be eligible dependent children.

Deductions under this act are not available to any other entity. A business or a firm, for example, cannot claim a deduction under this clause.

You cannot pay insurance premiums for your siblings’ health insurance as they are not eligible for any tax deduction. Premium payments can be done online or offline, except for cash. Net banking, debit cards or credit cards, all are accepted for online payment methods.

If you and a parent each paid a portion of the premium cost, you can each claim a deduction for the amount you paid.

The deduction must be made without disclosing the percentage of the premium amount that is subject to service tax and cess.

Deductions under Section 80D of the IT Act

  • Individuals can claim a deduction of up to Rs 25,000 in insurance premiums for themselves, their spouse, and their dependent children.
  • Individuals can claim a maximum deduction of Rs 50,000 for premiums paid on behalf of (a) themselves, spouse, dependent children, and (b) parents under the age of 60.
  • Individuals, on the other hand, can claim a maximum deduction of Rs.75, 000, which includes a premium for (a) self, spouse, dependent children, and (b) parents over the age of 60.
  • If an individual is above 60 years of age and pays premiums for self, spouse, dependent children and his dependent parents above 60 years of age, a maximum deduction of Rs 1,00,000 can be claimed by him/her.

Points to keep in mind while purchasing Health Insurance for claiming the Section 80D deduction

  • Check if the insurance has a cashless claim settlement method and a significant number of network hospitals in your location.
  • A specific proportion of the sum insured is allowed for hospital room rent and several other expenses. As a result, selecting an appropriate sum insured before getting health insurance is critical.
  • Read the information on pre and post-hospitalization expenses carefully. Many insurance policies cover all expenses incurred before 30 days and after 90 days of hospitalization.
  • As an extra bonus, several insurance companies provide yearly health screenings. Various tests and health evaluations are included in health check-ups, which are necessary and beneficial in the early detection of any disease.
  • Every year, review the no-claim guaranteed bonus clause. Many insurance companies provide a no-claim bonus, which is added to your sum insured for any years in which you haven’t filed a claim. This raises the maximum amount that can be claimed, providing more protection. However, one should remember that all permissible expenses, such as hospital room selection, are linked to the original sum assured, excluding the no-claim bonus.
  • All insurance companies now provide COVID cover too. However, specifics such as COVID coverage, expenditure caps, daily cash benefits, and additional charges such as PPE kits, as well as whether or not they are covered, should be understood before buying the insurance.

When you’re planning for the future, you would not want to exert pressure on your current income, right? So, keeping the above things in mind, invest in good comprehensive health insurance. Get tax benefits from Section 80D of the IT Act and secure your family’s future today!

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