Mediclaim insurance, also called health insurance, offers financial protection during medical emergencies. Beyond the evident benefits of ensuring timely medical care without the burden of hefty hospital bills, medical insurance plans also provide tax savings. These tax benefits can make a significant difference, especially when planning your financials.
What is Mediclaim Insurance?
Before diving into the tax benefits, it’s essential to understand what mediclaim insurance is. Mediclaim insurance is a type of health insurance plan that covers hospitalisation costs, treatment expenses, and other medical emergencies. Many often confuse mediclaim and health insurance, but the primary difference lies in the coverage. Mediclaim generally focuses on hospitalisation expenses, whereas health insurance plans can cover broader areas, such as critical illnesses and day-care procedures.
Now that we’ve got the basics, let’s explore how mediclaim insurance can save you money through tax benefits.
Tax Benefits Under Section 80D
The most important tax benefit of mediclaim insurance comes under Section 80D of the Income Tax Act. This section allows you to claim deductions on premiums paid for medical insurance plans for yourself, your spouse, dependent children, and even your parents.
Deductions for Self, Spouse, and Dependent Children
If you’re paying a premium for a health insurance policy that covers you, your spouse, or your dependent children, you can claim a deduction of up to ₹25,000. If you or your spouse is over 60 years old, this limit increases to ₹50,000.
Deductions for Parents
If you are paying the premium for your parents’ best health insurance policy, the tax deductions increase. You can claim up to ₹25,000 if your parents are below 60 years of age. However, if either of your parents is a senior citizen (aged 60 or above), the deduction limit rises to ₹50,000.
In case you are covering both yourself and your senior citizen parents, the maximum deduction you can claim is ₹1,00,000 (₹50,000 for yourself/spouse/children and ₹50,000 for parents).
Example
Let’s say you are 35 years old and pay a premium of ₹20,000 for your medical insurance plan. Additionally, you also pay ₹30,000 for your father’s health insurance policy. Since your father is a senior citizen, you can claim ₹20,000 under the self-family category and ₹30,000 under the senior citizen parent category. In total, you can save tax on ₹50,000, reducing your taxable income by that amount.
Preventive Health Check-Up Deductions
Another tax benefit under Section 80D is for preventive health check-ups. With health becoming a priority for many, preventive health check-ups are on the rise. The government encourages this proactive approach by allowing a tax deduction of up to ₹5,000 within the overall limit of ₹25,000 or ₹50,000, depending on your age category.
This amount can be claimed even if paid in cash, unlike health insurance premiums, which need to be paid through banking channels to claim deductions.
Tax Benefits for Critical Illness and Top-Up Plans
Many people opt for add-ons or top-up health insurance plans to enhance their coverage, especially when the primary policy may not be sufficient. Whether it’s a critical illness plan or a super top-up health insurance plan, the premiums paid towards these policies also qualify for tax deductions under Section 80D. As long as these are categorised under medical insurance, you can benefit from the tax deductions.
Tax-Saving Strategies for Your Health Insurance Planning
Integrating health insurance into your tax-saving strategies can prove advantageous.
1. Choose the Right Plan
The first step to maximising your tax benefits is selecting the best health insurance policy that meets your healthcare needs. Whether it’s a family floater or an individual plan, ensure you’re covered adequately, which will also help you leverage the maximum deduction under Section 80D.
2. Get Coverage for Senior Citizens
Consider getting a separate policy if you have senior citizens in your family. Not only does this ensure they are adequately covered, but it also allows you to claim higher deductions.
3. Don’t Overlook Preventive Health Check-Ups
Use preventive health check-ups even if you aren’t currently using your mediclaim insurance for hospitalisation or emergencies. You can claim the ₹5,000 deduction, encouraging early detection and a healthier lifestyle.
4. Top-Up Policies for Extra Coverage
Incorporating top-up or super top-up plans can help you manage higher medical costs. These plans kick in once your basic health insurance sum is exhausted, and you can also claim tax deductions on their premiums.
Conclusion
Mediclaim insurance offers a dual advantage: financial protection during medical emergencies and tax benefits that help you save. Understanding the tax deductions under Section 80D allows you to optimise your health insurance planning and significantly reduce your tax liability. Whether covering your family, senior citizen parents or opting for preventive health check-ups, the tax advantages make health insurance an essential component of any sound financial strategy. So, when selecting the best health insurance policy from companies like Niva Bupa, don’t forget to consider the tax benefits you stand to gain.
