Updated: May 28, 2019 11:18:05 am
Insurance is an important part of any sound financial plan. Various kind of protections can be availed through different insurance plans. Medical Health insurance is one such key requirement to protect your future against unforeseen medical contingencies. It helps you keep your long-term goals unaffected during medical emergencies. Financial planning also involves tax planning. Health insurance is one such product that comes with the dual benefit of financial protection and tax savings.
Along with the numerous health care benefits, health insurance also helps you save on income tax annually. It is important to know that the health insurance premiums paid in cash are not considered for the purpose of saving tax.
How to Save Tax on Your Health Insurance Premium?
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Health insurance policy for self and family
As per Section 80D of the Income Tax Act, 1961, tax deduction of Rs 25000 can be availed annually on your health insurance premium. The coverage offered by the policy can be benefited by self, spouse, or dependent children. This is applicable for policyholders below 60 years of age.
Health insurance policy for parents
You can claim tax deductions under Section 80D of the Income Tax Act for the additional health insurance policy that you purchase for either of your parents aged 60 years and above. The maximum amount of deduction allowed for such medical health insurance is capped at Rs 30000 per year.
Preventive health check-ups
When you buy a health insurance policy for covering yourself, spouse and children, along with tax benefits on health insurance premium, the additional claim can be made for the tax deduction on expenses incurred for preventive health check-ups during the term of the policy. Maximum of Rs 5000 per year is allowed for the tax deduction. When your senior citizen parents are covered under separate health insurance plan, expenses incurred for their preventive health check-ups during the policy term is also considered for the tax deduction of up to Rs 5000.
Let’s understand this with an example. Let’s say you have a family floater health insurance policy covering yourself, your spouse and two children. You have paid a premium of Rs 15000 for this coverage. And you have also purchased one more separate health insurance policy for your senior citizen father for which you have paid Rs 22000. Let’s say, you have incurred preventive health check-ups for your family and senior citizen father Rs 8000 and Rs 5000 respectively. Now, take a look at your tax eligibility on health insurance premiums paid for the year.
Apart from saving income tax on health insurance premium, here are some more ways to save income tax on your healthcare expenditure.
Critical illness treatment cover (under section 80DDB).
Health insurance policies issued for critical illnesses not just protect you against illness, but also helps you avail tax advantage. Under Section 80DDB of the Income Tax Act, deduction of up to Rs 40000 (below 60 years age, Rs 60000 (for senior citizens) and Rs 80000 (for super senior citizens of 80 years and above) for the expenses incurred for treatment of specified critical illness.
Treatment expenses for dependants with disability (under section 80DD).
In case you are taking care of any dependant with disability (spouse, parents, children, and siblings) then you are eligible for the tax deduction of up to Rs 75000 for incurring such health care expenses. In case of severe disability tax deduction allowed is up to Rs 1.25 lakhs. The same can be claimed for self (person with a disability) also under Section 80U.
Medical allowance (under section 17)
As per Section 17, medical allowances paid by your employer as a part of your salary for you and your family (spouse, children, parents) are eligible for a tax deduction. The maximum limit on eligibility is Rs 15000 per year.
The Bottom Line
To sum up, health insurance is the need of an hour that not only keeps you and your family secured against medical emergencies but also saves you an amount of tax for the year. However, health insurance investments are not just for tax saving. The primary aim is to get a comprehensive health cover.
Biresh Giri is Appointed Actuary, Acko General Insurance.
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