Health Insurance Policies and Tax Benefits 2024
04 Jun 2024 5 mins Insurance Planning
Understanding the tax benefits of health insurance is essential for maximizing your savings, especially with the recent updates from Budget 2024. Whether you are familiar with these benefits or not, it’s crucial to stay informed to make the most of your health insurance policy. Let's examine how using health insurance, especially plans from companies like Star Health Insurance and Acko Health Insurance, might help you take advantage of income tax benefits.
What Benefits Does Health Insurance Have for Income Taxes?
In addition to being essential for paying for medical expenses, health insurance has major income tax advantages. Under Section 80D of the Indian Income Tax Act, the premiums you pay for health insurance are tax deductible. By doing this, you can lower your taxable income and, consequently, your total tax obligation. Note: With new income tax legislation, tax benefits could vary.
Income Tax Benefits Under Section 80D
Investing in health insurance is a wise choice at any age. It protects you and your family from unexpected medical expenses and offers substantial tax benefits. Various plans offer coverage ranging from ₹2 lakhs to ₹20 lakhs or more. The premiums paid for these policies can be deducted from your taxable income.
You can claim deductions for premiums paid for yourself, your family, and dependent parents. Here are the limits:
Extra Charges and Passengers
Tax deductions are also available for family floater plans, which include coverage for your dependant parents, spouse, and kids. This covers any extra riders you may have added to your policy and any critical sickness coverage.
What Amount Is Allowed?
The Income Tax Act permits deductions for two categories of premiums: dependent parents' and your own. For plans purchased in India, Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are also eligible to claim these deductions.
Here are the limits based on the age of the policyholder:
Additionally, you can claim up to ₹5,000 for preventive health check-ups (₹7,000 for senior citizens), provided you haven’t exceeded the aforementioned limits.
Preventive Health Check-Ups
Regular health check-ups are crucial for early detection of health issues and also qualify for tax deductions. You can claim up to ₹5,000 per year for preventive health check-ups for those under 60, and ₹7,000 for senior citizens.
Payment Methods for Premiums
To qualify for income tax benefits, premiums must be paid through non-cash methods like cheques, credit/debit cards, or bank drafts. Cash payments do not qualify, except for preventive health check-ups.
Multi-Year Policies and Tax Benefits
Multi-year health insurance policies also qualify for tax benefits. The deduction is calculated proportionately over the policy term, ensuring continuous tax relief.
Exclusions
Certain conditions disqualify you from claiming tax benefits:
- Premiums paid in cash (except for preventive health check-ups).
- Premiums paid by someone else on your behalf.
- Premiums paid for in-laws, siblings, or friends.
- Claims that exceed the limits specified in Section 80D.
Choosing the Right Health Insurance Plan
When selecting a health insurance plan, consider not just the tax benefits but also the coverage, reliability of the insurer, and specific features that meet your needs. Look for policies that offer extensive coverage, including critical illnesses, pre and post-hospitalization expenses, and alternative treatments.
Required Documents
To claim income tax deductions, you need:
- Full payment receipts.
- Proof of payment date within the financial year.
- Non-cash payment receipts.
Remember: Tax benefits are subject to change with updates in income tax laws, so stay informed and consult a tax advisor for the latest information.
By understanding and utilizing the health insurance tax benefits outlined in Budget 2024, you can ensure financial security and optimize your savings. Whether you choose Star Health Insurance, Aclo Health Insurance, or another provider, make sure to select a policy that offers both extensive coverage and significant tax benefits.
Frequently Asked Questions (FAQs)
1. Can I claim a tax deduction for health insurance premiums paid for my in-laws?
- No, premiums paid for in-laws are not eligible for tax deductions under Section 80D.
2. Is the preventive health check-up deduction available if I have already claimed the maximum limit under Section 80D?
- No, you cannot deduct the cost of a preventive health checkup unless you haven't gone over your allotted deductions.
3. Are NRIs eligible to deduct their Indian health insurance premiums from their taxes?
- Yes, NRIs are eligible to deduct up to ₹25,000 from their premiums for health insurance policies purchased in India.
4. Are premium payments made in cash for health insurance free from taxes?
- Not at all, please. The only non-cash payments, including checks, credit/debit cards, and bank drafts, that are eligible for tax deductions are preventive medical testing.
5. Which paperwork is needed in order to file a tax advantage health insurance claim?
- In order to receive tax benefits, you will need to provide documentation of the payment date within the fiscal year, the full payment receipt, and any non-cash payment receipts.
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Author - Abhishek Sonawane
Abhishek Sonawane, an MBA graduate from the prestigious Indian Institute of Management Visakhapatnam(IIMV), brings over ten years of experience in the finance domain. His extensive background includes various roles in financial management and strategy, providing him with a comprehensive understanding of the financial landscape. Abhishek’s expertise and dedication to financial education make him an authoritative voice in personal finance, helping readers make informed financial decisions.