Health Insurance (or) Mediclaim insurance is a must-have for all. Considering the rate at which medical costs are rising, it is very important to have sufficient medical insurance coverage. The medical inflation in India is increasing at a significant rate, almost 12% to 15% year on year. Therefore, it is critical to have an adequate health cover, it is even more important for senior citizens. It is always better to be safe than sorry!
Absence of health insurance can wipe out your savings. Having sufficient coverage will safeguard you and your dependents from getting into financial crisis during hospitalization or critical illnesses’ treatments or accidents.
Besides medical coverage, health insurance plans can provide Tax benefits to you. The premium paid towards medical insurance can be claimed as Health Insurance Tax Deduction under section 80D of the Income Tax Act, 1961.
However, a new income tax regime has been proposed in Budget 2020. As per these new amendments, the applicability of Section 80D tax benefit is dependent on whether you opt for the old (or) new tax structure.
Section 80D Tax Benefit under the New Tax Regime AY 2021-22
Can I claim Health Insurance Premium Section 80D Income Tax Benefit under the New Tax Regime?
As per the Finance Bill 2020-21, you can now opt for a lower new income tax slabs rates of 15% and 25% in addition to the 10%, 20% and 30% slab rates.
Individuals opting to pay tax under the new proposed lower personal income tax regime will have to forgo almost all tax breaks (tax benefits) that you have been claiming in the old tax structure.
All income tax deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.
So, the medical insurance premium will not be claimable u/s 80D.
(To know which Income Tax Deductions & Exemptions are allowed under New Tax Regime AY 2021-22, you may kindly go through this article @ Income Tax Deductions under New Tax Regime FY 2020-21 )
Health Insurance Sec 80D Tax Deduction FY 2020-21 / AY 2021-22 | Old Tax Regime
In case, you wish to opt for old Income Tax Slab rates (as shown in the below table) then you can claim your IT deductions and exemptions.
In the union budget 2018, the government of India implemented the below changes with respect to deductions available on Health Insurance and/or towards Medical treatment. The same provisions are applicable for FY 2020-21 (AY 2021-22) as well.
The below limits are applicable for Financial Year 2020-2021 (or) Assessment Year (2021-2022) u/s 80D.
Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, parents and dependent children).
NRIs also can claim tax deduction u/s 80D.
My View :
- Health insurance cover is a ‘must-have’ for everyone. ‘Tax saving’ is only a value addition in your financial planning process and not the primary factor to plan your investments/savings.
- Kindly first analyze which tax regime (old or new) is beneficial to you. If the new tax structure is right to you, you have to forgo claiming tax benefit on your existing health insurance policy premium, that’s ok! (Related article – New Income Tax Slab Rates Vs Old Tax Regime | Which one is better? )
- In case, you are planning to buy a new health insurance policy, kindly go ahead and get sufficient insurance cover. Do not worry too much about the unrealized tax benefit (if you opt for the new tax regime while filing your taxes).
Let’s start saving/investing/spending without the ‘tax saving’ angle. Most of the personal finance mistakes happen just to save some taxes.
Just because there is no tax saving benefit does not mean that you neglect your savings/investments. Instead, concentrate on how to increase your income, how you can manage your cash-flows (budgeting) better and picking right saving/investment products as per your financial goals!.
Continue reading :
- Income Tax Exemption Vs Tax Deduction Vs Tax Rebate Vs TDS | Key Differences
- How Income Tax Department tracks the High Value Financial Transactions?
- Income Tax Deductions List FY 2020-21 | New Vs Old Tax Regime AY 2021-22
- Difference Between Individual (Personal) & Employer based Health Insurance Plans – Pros & Cons
- Best Family Floater Health Insurance Plans – Details, Checklist & Comparison
(Post first published on : 16-December-2020)