How can health insurance help you to reduce your tax liabilities?
This is one avenue where an individual can save his tax money is by buying a health insurance policy
Tax saving measures play an important role in one’s financial planning. As an individual’s financial income grows, so does his taxable income or his taxes. Hence, it is important to put measures in place that save as much tax as possible. While paying tax is an important duty of a citizen of a country, one should be equally conscious of not overpaying it, and make a wise choice of investments to fine-tune his financial responsibilities. One avenue where an individual can save his tax money is by buying a health insurance policy.
Health insurance not only safeguards an individual from unexpected medical emergencies but also offers a range of benefits like cashless hospitalization, pre and post-hospitalization medical expenses. Most importantly, it also helps you in saving some money in taxes, as you can avail income tax exemption under Section 80D of the Income Tax Act, 1961, based on premiums paid for your health insurance policy.
Tax Saving under Section 80D
Under section 80D, an individual (below 60 years) can claim a deduction of a maximum of Rs. 25,000 for health insurance premiums. This includes the cost of preventive health check-ups (for oneself, spouse, and dependent children).
Benefits for elderly parents and citizens:
Some additional benefits under the plan for elderly parents are:
An additional deduction of up to Rs. 50,000 is also available if health insurance is bought for elderly parents (above the age of 60), thus bringing the total income tax saving to up to Rs. 75,000.
If parents are less than 60 years of age, then a deduction of Rs. 25,000 is allowed.
If the policyholder and parents are both above 60 years of age, then he will get an additional deduction of Rs. 50,000, thus bringing the total deduction to Rs. 1 Lakh.
If the individual’s spouse is also working and if he/she buys an insurance policy for his/her parents, then a deduction of up to Rs. 50,000 is allowed.
Benefits for medical treatment expenses:
Preventive health checkups: An amount of up to Rs. 5,000 can be submitted for tax exemption.
OPD charges and diagnostic tests: Apart from the medical expenses incurred for hospitalization expenses, tax benefits can also be availed for out-patient departments or OPD consultation charges, and for this cash payments are also included for submission, unlike premium payments.
Apart from the above deductions, further tax-saving measures are available as follows:
Medical Allowance:
If an individual’s employer deducts an amount for medical allowance for the employee and/or his family, the amount is eligible for deduction under Section 17.
Disability:
Under Section 80U, a person with a disability can claim a deduction of Rs. 75,000, and the one with severe disability (80% or more) can claim a deduction of Rs. 1,25,000. A supporting medical certificate needs to be submitted.
Critical Illnesses:
A person who avails of a health insurance policy can also claim a deduction under Section 80 DDB, an amount of Rs. 40,000 to Rs. 1,00,000 for medical expenses related to specific critical illness mentioned in the insurance policy document. To avail of this benefit, the individual needs to submit the Doctor’s certificate while filing for an income tax return.
There is no surprise that health insurance is a perfect combo of medical security and tax benefits. Invest in it at the earliest, if you haven’t already.