Family comes first; thus, a family health insurance policy with enough coverage should be at the top of your priority list to ensure that medical expenses are taken care of. During medical crises, a health plan allows you to choose the best healthcare facility accessible without paying much attention to finances. It is not enough to buy a random policy to meet your medical needs efficiently.
The cost of medical treatments is rising day by day. So, it is a wise choice to look for a health insurance policy that is cost-effective and, at the same time, helps you save tax.
Save tax on health insurance premium payment
You are eligible to deduct up to Rs. 25,000 from your annual premium payment as a policyholder for health insurance. Your dependent children, your spouse, and you are all covered by the insurance. The tax benefits associated with senior citizen health insurance coverage would rise to Rs. 50,000 when you or your partner are almost 60 years of age or older. This limit is backed up by an extra Rs. 5,000 coverage for expenditures expended for family members’ health check-ups, including parents, spouses, and dependent children.
- Preventive health check-ups. You have the opportunity to reduce your income tax by accounting for expenses related to preventive health check-ups throughout the policy duration. The tax exemption limit is Rs. 25,000 for individuals below 60 years and Rs. 50,000 for senior citizens. It is also possible to claim coverage for regular health check-ups that amounts up to Rs 5000.
- Health insurance policy for parents. Within the provisions of Section 80D of the Income Tax Act 1961, you have the opportunity to secure an additional tax-saving advantage when you contribute to the premium for health coverage for any of your parents. The deduction eligibility extends up to Rs. 50,000 p.a. and above.
- No tax benefit on cash payments. Under the framework of Section 80D of the Income Tax Act 1961, you have the chance to gain an extra tax-saving benefit by paying the premium for health coverage for any of your parents. The deduction eligibility stretches up to Rs. 50,000 every year enabling you to save up to Rs. 50,000 in taxes for parents aged 60 years and above.
Health insurance and tax savings: what are the exclusions?
Certain conditions preclude the allowance of health insurance tax benefits under Section 80D:
- Non-payment of health insurance premiums within the financial year.
- Payment of the premium in cash.
- Unavailability of the receipt for the premium payment.
- Premium payment made by another person on behalf of the individual seeking the deduction. In other words, the premium should be financed from the taxable income of the person intending to claim the deduction.
- Premium payment for the health insurance policy of in-laws, siblings, friends, etc.
- The deduction claimed is not in accordance with the limits specified in the Act.
- The maximum deduction on premiums for policies is constrained to the amounts specified in Section 80D, even if a higher amount has been paid.
Hence, it is advisable to ensure policy renewal within the fiscal year and opt for payment methods such as cheques or online transactions. Documentary evidence of payment and policy renewal should be readily accessible when seeking deductions for medical insurance.
Having health insurance is crucial and advantageous, offering the opportunity to receive tax benefits on the premiums paid. It’s important to assess your requirements and determine whether including dependent parents is necessary for maximising tax benefits. When filing your income tax return, make sure to claim the tax exemption to fully avail yourself of the benefits.
Tim Williamson, a psychology graduate from the University of Hertfordshire, has a keen interest in the fields of mental health, wellness, and lifestyle.