To promote health and well-being, timely diagnosis and treatment is imperative. Health Insurance companies, like ACKO, offer a financial cushion during emergencies while allowing an individual to get the right treatment at the right time. To encourage people to buy health insurance, the government offers tax deductions. These tax benefits encourage taxpayers to purchase health insurance plans for themselves and for their parents to lower their tax burden. Let's explore both the old and new tax regime from a health insurance perspective.
Tax Benefits for Health Insurance under the Old Tax Regime
The old tax regime allows for deductions under Section 80D. When you pay for health insurance for yourself, your spouse, children, or your family, a maximum deduction of Rs. 25,000 is allowed. An additional Rs. 5000 can also be claimed for preventive health checkups (included in the maximum cap). An individual can claim an additional Rs—25,000 deduction if they pay insurance for their parents.
If the health insurance premium is paid for a senior citizen, a maximum deduction of Rs. 50,000 is allowed. When a senior citizen purchases health insurance for themselves or their spouse, a Rs. 50,000 deduction can be claimed. These deductions can be claimed only if you pay your insurance premium using modes like bank cheques, bank transfers, UPI, and other digital modes. Deductions can't be claimed if the payment is made using cash.
Here is a table that summarises tax deductions under the old tax regime:
| Insured | Amount of Deduction (in Rs) | |
| Age Below 60 years | Age Above 60 years | |
| Self, Children, Spouse | 25,000 | 50,000 |
| Parents | 25,000 | 50,000 |
| Max Deduction | 50,000 | 1,00,000 |
| Preventive Healthcare | 5,000 | 5,000 |
A typical family with health insurance for the earning member, spouse, kids, and senior citizen parents can claim a total deduction of Rs. 75,000 under the old tax regime.
Tax Benefits with New Tax Regime
The new tax regime has eliminated the option for deductions. About 70 deductions, including Section 80D tax benefits for health insurance, have been removed. This means that those who opt for the new tax regime cannot claim deductions under Section 80D. Apart from the standard deduction of Rs. 50,000 that applies to everyone, no other deductions are allowed.
While there are no tax benefits specifically for health insurance, the overall tax burden for a taxpayer reduces with the new tax regime if they don't claim exemptions or deductions generally.
Which Tax Regime is Suitable?
The new tax regime is the default tax regime for taxpayers. However, you can opt for the old tax regime at the beginning of the financial year and claim tax deductions for insurance premiums paid during the year. If you have invested in tax savings schemes and pay for multiple health insurance policies (among others), the old tax regime may reduce your tax outgo. Otherwise, a new tax regime may be ideal due to the lower tax rates for the income slab.
Those who follow the old tax regime expect an increase in tax deductions with the old tax regime for health insurance. This can be a good motivator for people to go and buy health insurance, especially for senior citizens.
Takeaway
From a health insurance perspective alone, the new tax regime doesn't offer any tax benefits regardless of the number and type of health insurance premiums you pay. However, the decision to purchase health insurance must not be made with the intent of tax saving alone. After all, the purpose of health insurance is to offer coverage and peace of mind when a medical emergency strikes. Comprehensive coverage ensures that the insurer will step in and meet the medical costs while you seek treatment for your health issues.
Get comprehensive health insurance coverage to ensure financial security. ACKO offers health insurance plans with potential tax savings at an affordable price.
Moneycontrol Journalists are not involved in creation of this article.
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