The premiums that an individual pays for health insurance for parents, family or self not only offer financial assistance in times of medical emergencies but also bring down the tax liability.
Most of the financial planners state that step one in case of a financial plan must be ensuring the fact that an individual has enough health insurance. Before an individual starts saving substantially for the future, he/she must get health insurance cover for family and self. The premium that is paid offers tax benefit too. It greatly reduces the taxable income thereby bringing down the tax liability.
What is Preventive Healthcare?
Preventive Healthcare is also called prophylaxis or preventive medicine and consists of the measures that are taken for prevention of diseases. The prevention method relies a lot on the anticipatory actions that are categorized as tertiary, secondary, primary and primal prevention.
There are several methods for disease prevention. Children and adults are recommended to go for regular check-ups for disease screening and identifying risk factor, if any. Some of the diseases that need checking are gonorrhoea, pap test, osteoporosis, syphilis, depression, HIV, etc.
Tax Benefits as per IT Laws:
There are several things that you must understand about tax benefits of the health insurance schemes as per the income tax laws.
Parents – The premium that is paid for of an individual’s parents is eligible for tax deduction under Section 80D as per the Income Tax Act. The benefit offered is offered to the people who have been paying premiums for parents, children, spouse and self. Most importantly, the tax deduction does not depend on whether the parents or children are dependent on the individual. However, the amount of tax benefit depends on the age of the individual who is the holder of the medical insurance.
The maximum deduction that an individual can avail on premium paid for parents, children, spouse and self is Rs.25,000. However, the individual must not be above 60 years of age. In case a senior citizen (above 60 years) pays the premiums, then the quantum of tax benefit goes up to Rs.30,000. Thus, a taxpayer can avail a tax benefit of Rs.55,000 under Section 80D if his/her age is below 60 years and his/her parents’ age is above 60 years. The maximum tax benefit that can be availed under Section 80D by someone above the age of 60 years and paying premiums for health insurance is Rs.60,000.
Life Insurance Companies Riders – The tax benefit under Section 80D of the Income Tax Laws is calculated on the premium that is paid towards health insurance policies. This section does not put any restriction on an individual from buying health insurance schemes. Any premium that is paid for medical insurance riders or critical illness riders are eligible for tax benefits under Section 80D. The premiums for health insurance schemes offered by the life insurance organisations also qualify for tax advantage under the Income Tax Laws.
Health Check-ups – If the individual makes a payment of Rs.20,000 as premium for Mediclaim and then goes through a health check-up that costs Rs.5,000 then the total amount of Rs.25,000 can be availed under 80D. Most of the prominent hospitals offer packages for preventive health check-up. With all the lifestyle ailments increasing with time, it is better to keep a check on health. Both Fixed Benefit insurance plans and Indemnity insurance plans are eligible for tax benefit. Individual health insurance scheme is popularly known as Family Floater or Mediclaim plans. Critical illness plans and daily hospital cash plans offered by a general insurance company or standalone health insurance organisation also qualify for tax benefit.
Cash payment – An individual can choose to pay the premium in cash. However, in order to avail tax benefit, premiums must not be paid in cash as it is not allowed by the Income Tax Laws. Payments can be made via credit card, drafts, cheques and internet banking. Cash payment is eligible under Section 80D for preventive health check-up.
Who can Claim Deduction for Preventive Health Check-up Under Section 80D?
Any individual or HUF (Hindu Undivided Family) can claim deduction in case of money spent on health check-ups for:
- Dependent children
- Parents (both non-dependent and dependent)
In case of a Hindu Undivided Family, it is the HUF member who has to make the claim.
What is the Maximum Amount that can be Claimed?
The maximum amount that can be claimed for health check-ups including that of family members is Rs.5,000.
Points to remember:
- The maximum tax benefit that can be availed with Preventive Health Check-up is Rs.5,000.
- Under the Preventive Health Check-up, cash receipts are accepted.
GST rate of 18% applicable for all financial services effective July 1, 2017.
Disclaimer: Premiums may vary depending upon factors like age, location and prevailing taxes/GST.