India, as a country, has benefitted greatly from the opening up of its economy, and has got access to newer technology in the field of medicine over the past few years. This has allowed our country to improve the overall health of its population significantly over the last few decades, giving us better health and longer lives.
With better technology, we have had to incur more costs over the years to get this better health care for ourselves. Today, it makes a lot of sense to get medical insurance for ourselves to ensure that we are ready to take on these additional expenses to take care of our own health. As a result, Medical insurance should be taken very seriously and considered a part of our lives.
In India, most people know that a person can also save on their tax up to Rupees 1,00,000/- under section 80C of the Income Tax Act 1961, and payments which have been made towards medical insurance under section 80D of the Income Tax Act, 1961 can also help you save Income Tax. According to section 80D of the Income Tax Act, 1961, any individual can claim a deduction in respect of a medical insurance premium paid up to Rupees 15,000/- for himself and his spouse and dependent children. He can also claim a further deduction from taxable income for the medical insurance premium up to Rupees 15,000/- for his parent(s). Add to this a further deduction of upto Rupees 20,000/- in case this premium is paid for a senior citizen of age 65 years or more, and you can see how payments made from medical insurance can help you save tax every year.
To help understand the concept, here is an example. Let us say that Ram has paid two medical insurance premiums. One is for himself, his wife, and children, while the other is for his dependent parents who are both over the age of 65 years. He pays Rupees 13,000/- and Rupees 24,000/- respectively towards these two medical insurance premiums every year. As discussed earlier, he will be eligible to get deductions under section 80D of the IT Act, 1961. For the 1st premium (Rupees 13,000/-), the entire sum will be allowed as a deduction for tax calculation purposes, as deductions are allowed on actual premium payments made up to Rupees 15,000/-. In case of the 2nd premium of Rupees 24,000/-, he will only be able to claim a maximum sum of Rupees 20,000/- for the medical insurance premiums he has paid for his parents who are 65 years of age or above, since the maximum limit allowed for deduction is Rupees 20,000/- only. Hence, his total deduction allowed under medical insurance will be Rupees 33,000/- (Rupees 13,000 + Rupees 20,000/-) in total for both these medical insurance policies.
Some medical insurance providers have come up with new and innovative medical insurance policies that allow you to get the maximum deduction allowed (i.e. Rupees 15,000/- per year) while adjusting the sum insured every year. Those who want to use medical insurance as a tax saving tool can look into these policies like ICICI's Health Advantage Plus, for example.