Calculation of the Health Insurance Deduction and the Maximum Limit Allowed

Life, as you know, is fraught with uncertainty, whereas death and taxes are unavoidable. People have begun to value health after COVID and, more importantly, recognise the importance of having healthcare insurance coverage and quick access to quality healthcare. Health insurance is required for any medical emergency because it provides the financial support required in such situations. Hospitalisation and surgeries can burn a large hole in your wallet and deplete your hard-earned savings.

 

All of these things can be avoided if you plan ahead of time and purchase healthcare insurance. Health plans also provide tax savings and come in handy in medical crises.

This blog will discuss the medical insurance tax deductible and how it impacts your health policy.

 

What is Medical Insurance Tax Deductible?

In India, medical insurance is an essential aspect of financial planning. It helps to protect one’s financial security in case of any medical emergency. The Government of India provides tax deductions on healthcare insurance premiums paid. This deduction is available under Section 80D of the ITA (Income Tax Act) 1961. The deduction is given to a taxpayer who pays the insurance premiums for themself, their family, or a dependent. It is also available for preventive health check-ups.

 

The deduction is available for the premiums paid for insurance policies such as Mediclaim and other healthcare insurance policies. It is also available for the premiums paid for critical illness insurance and top-up plans. It is available for the premiums paid for health insurance policies for self, dependents, and/or spouse.

 

The maximum deduction allowed is ₹25,000 for taxpayers below the age of 60 years and ₹50,000 for taxpayers exceeding the age of 60 years. The deduction is also available for the premiums paid for preventive health check-ups up to ₹5,000 in a financial year.

 

Calculating Medical Insurance Tax Deduction

The calculation of the healthcare insurance deduction is quite simple. It is the total amount of health insurance premiums paid during the financial year minus the amount of the deduction. The amount of the deduction is the lower of the following two amounts:

 

• The exact amount of the insurance premium paid in the year
• The maximum deduction allowed under Section 80D

 

For example, if you paid an insurance premium of ₹50,000 in the financial year and you are below the age of 60 years, then the deduction would be ₹25,000. If you paid an insurance premium of ₹15,000 in the financial year and you are below the age of 60 years, then the deduction would be ₹15,000.

 

In addition to the deduction on insurance premiums, there is also a deduction available for preventive health check-ups up to ₹5,000 in a financial year.

 

It is important to remember that the deduction is available only for healthcare insurance premiums paid in the financial year. Any premiums paid in previous years cannot be claimed as a deduction. Along with this, the taxpayer can also claim a deduction of ₹50,000 on contributions to a medical insurance scheme provided by the Central Government.

 

Parting Words

Section 80D deductions can be claimed if healthcare insurance premiums are paid by electronic or digital means such as cheques, debit cards, credit cards, UPI, and so on. As a result, if the insurance premium is paid in cash, the individual will be unable to claim the Section 80D tax benefit.

 

Medical insurance tax deductible is an important aspect of financial planning in India. It helps to protect one’s financial security in case of any medical emergency. Platforms like Niva Bupa can help you find the best-suited health policy and save tax on health premiums.