Tax Benefit on Health Insurance

While medical emergencies do not strike frequently to most people, one cannot afford not to have a Health Insurance with medical inflation running in double-digits in India. Health Insurance is often ignored by young professionals and their attitude towards Health Insurance has been somewhat lax. Young professionals are disinterested on Health Insurance and most of them give cold shoulder when they are advised to get one. Most young individuals do not realize the need of having a Health Insurance until they find themselves or their near ones in circumstances where they need one.

However, Health Insurance is getting important for young salaried professionals now due to the compulsions of working lifestyles. Fiercely competitive corporate environment, extended working hours, unhealthy food habits, lack of exercise, never-ending stress and unhealthy habits such as smoking and alcohol are the becoming routines (or compulsions) of professional lives today. These factors have resulted in young working / salaried professionals falling victims to the lifestyle-related disorders. And this is relevant to both male as well as female professionals. With changing times, it is necessary that young professionals understood the product better and secure themselves against such possibilities. While providing protection against expenses related to medical emergencies, Health Insurance also offers tax benefits as an added advantage. The premium paid for a Health Insurance policy can be deducted from the total income under Section 80D of the Income Tax Act. The Section 80D of the Income Tax Act provides for tax deduction from total taxable income for a payment of Health Insurance premium paid by an individual (or a HUF). The tax deduction under Section 80D is allowed for making a payment to purchase or renew a Health Insurance policy on self, spouse, dependent parents or dependent children.

For individuals who are below 65 years, the amount of deduction available is up to Rs 15,000 on Health Insurance policy for self, spouse and dependent children. A further deduction of Rs 15,000 can be claimed for paying the premium for one's parents. The limit goes up to Rs 20,000 if either parent is a senior citizen. Therefore, you can claim a deduction up to Rs. 30000 on your taxable income, and if your parents are senior citizens, the deductible amount goes up to Rs. 35000. If you are Senior citizen than maximum deduction can go upto Rs. 40,000.

Before making a tax benefit, one must note that the premium payment has to be done either through a cheque or credit card to be able to claim tax deduction. The health insurance premium that you pay must be from the taxable income applicable for the year you offer for tax.

The penetration of Health Insurance in India is extremely poor and stands at abysmal 0.80% of the gross domestic product (GDP). At the same time, according to the World Bank, the government’s spending on healthcare as a percentage of GDP (around 4% in 2012) is low compared to most developed as well as developing countries. A high medical inflation is making the healthcare beyond the reach of many. In fact, more than three-fourth of all healthcare spending in India is Out-of-Pocket. Amid this backdrop, it is important for the government to ensure penetration of Health Insurance. As part of Indian healthcare sector, we strongly believe that increasing the section 80D exemption limit for Health Insurance will sure go a long way in improving Health Insurance in India. -Mr.Mukesh Kumar – Executive Director, HDFC ERGO General Insurance Company

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