Tax Benefits Associated with Health Insurance Policies

Health insurance plans are a great tool for financial security against the rising cost of medical expenditure. Along with the medical coverage, a policyholder can avail of the health insurance tax benefits, which reduce the burden of healthcare expenses.

Whether you opt for health insurance plans for a family or as an individual, you are entitled to save tax on them. Now you may wonder how? For this, keep reading this article, as we are going to discuss the various tax advantages associated with health insurance policies and other related aspects.

  What Are The Tax Benefits of Health Insurance Policy?

1. Tax Deductions for Premiums

When you buy a Health Insurance plan in India from insurance companies like Tata AIG or else, you can claim a deduction on health insurance premiums you paid from your taxable income under section  Section 80D of the Income Tax Act.

It will help to reduce your tax liability while leveraging the benefits of health insurance coverage.

2. Health Savings Account (HSA) Contributions

HSA is like a tax-free savings account that allows you to save money for future qualified medical expenses such as vision care, dental care or more each year up to a specified annual limit.

These contributions can be made by the individual or their employer that can be used to pay for qualified medical expenses. These tax-advantaged contributions lower the individual’s taxable income, thus reducing their tax liability.

3. Employer-Sponsored Health Insurance

Employer-sponsored plans are those offered by the employer or paid either fully or partially by the employers to provide their employee’s healthcare benefits and coverages.

Thus, when an employee as an individual determines their taxable income, then it does not become part of it. Ultimately it helps the employees leverage health insurance benefits without carrying any tax burden on their shoulders.

4. Government-Sponsored Health Insurance Tax Subsidies

Government-Sponsored Health Insurance refers to schemes powered by the Central or State Government that provide quality services at low-priced insurance coverage. These taxes and subsidies allow lower-income earners, individuals, and families to afford health insurance coverage.

For instance, Ayushman Bharat PM-JAY, the world’s largest health assurance programme, covers secondary and tertiary care hospitalisation for over 12 crore vulnerable and low-income families. It makes up the bottom 40% of the Indian population, for Rs. 5 lakhs per family per year.

5. Self-Employed Individuals

Not only employees but self-employed individuals can also leverage the benefit of tax deductions. They can deduct health insurance premiums from their business expenses. It will help them offset their taxable income, reducing their tax liability. However, it can vary according to your business entity, such as sole proprietorship, HUF, partnership, etc.

6. Medical Expense Deductions

While not specific to tax-saving medical insurance, medical expenses that exceed a certain percentage of your income (as defined by tax laws) might be deductible. It will reduce the financial burden of taking the qualified medical expenses from your pocket.

7.  Tax Benefits for Long-Term Care Insurance

Long-term care insurance is insurance coverage designed for those who cannot perform their daily activities due to age, chronic illness or other conditions. Therefore the premiums paid on the policy are qualified for tax deductions.

However, it may vary according to the age of the policyholder. The older the age, the higher the deductions. These tax benefits help incentivise older individuals and provide them with financial relief during their hard times.

8. Dependent Coverage

A dependent is a person eligible for coverage under the policyholder’s health insurance coverage. It includes spouses, children, and parents.

Thus, if you’re covering health insurance premiums for your dependents, you might be eligible for additional tax benefits or deductions related to their coverage. Additionally, the deduction amount may vary according to the age of the dependents.”

  What Is The Maximum Tax Benefit For Medical Insurance in India?

Here’s a table of  maximum health insurance tax benefits  in India under Section 80D of the Income Tax Act:

 Conclusion

Health insurance policies are crucial to combat these inflated medical care costs and help individuals and their families access qualitative health care services without financial stress. However, to alleviate it further, tax benefits play a significant role. Individuals can optimise their health and financial well-being through tax deductions, credits, and strategic tax planning.