Purchasing a comprehensive health policy is a crucial part of financial planning. People might be inclined towards creating fixed deposits, investing in mutual funds, etc. However, when it comes to spending on a health policy, there might be some reservations. This might be because a health policy is not an investment but a precautionary measure to prevent financial losses.
In order to encourage people to look at medical insurance in India as a favorable option, there are certain tax benefits one can avail, such as a deduction under section 80D of the Indian Income Tax Act.
5 Important Things about Deduction with regard to Medical Insurance in India
1 – Exclusive section
Tax benefits act as an incentive to purchase a comprehensive health insurance policy. Section 80D is a part of Indian Income Tax Act that offers tax benefits for a specific type of health insurance. Unlike section 80C which pertains to Life Insurance and other investments, section 80D is an exclusive section for health insurance.
2 – Policy-based deduction
The amount of Income Tax deduction you are eligible to receive depends upon the choice of policy purchased. There are different deduction slabs for different types of policies. These slabs might change as per the annual budget declared by the Government of India.
3 – Digital payments
In order to avail income tax benefits, you need to pay insurance premium via digital modes. Internet banking, debit card, etc. are popular digital modes of making the payment. You will not be eligible for tax benefits if you pay the insurance premium in cash. Note that cash payment for preventive health check-ups is an exception and tax benefits shall be provided for the same.
4 – Applicable on most policies
You can avail tax deductions on indemnity as well as defined benefits policies. Individual, Family Floater and Critical Illness plans offer tax benefits. However, group health insurance is not eligible for tax benefit. But if you enhance the group health insurance policy by paying extra premium then you are eligible for tax deduction.
5 – Service Charge
The deduction is not applicable for the service tax levied on payment of the insurance premium. Service tax charges are an exclusion when it comes to availing health insurance tax benefit under section 80D of the Income Tax Act.
Comprehensive Health Insurance
Be clear while purchasing health insurance. Do not look at health insurance solely from a tax saving perspective. Look at it as a measure to prevent financial losses in case of health-related issues that provides the incentive of tax benefit. Concentrate on ensuring that you and your family have a comprehensive health insurance cover and then make changes to maximize tax benefits.
Choosing a health insurance policy that offers extensive coverage at a low price has become easy due to the rise in online insurers. Nowadays, you do not have to fill lengthy forms and navigate through a maze of insurance jargon to purchase a health insurance policy.
You can simply read policy details and features on the internet and purchase a plan instantly by making online payments. However, the onus of making the right choice is on you. Therefore, one must go through the terms and conditions, understand them in detail, and then make the online payment for purchasing the health insurance policy.
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