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How to save tax legally?

Published On Mar 17, 2019, Updated On Dec 02, 2020

You must have brainstormed a lot to find a perfect answer to this question, but might have failed a lot of times. Tax saving is an essential part of financial planning where one trip to the hospital is sure to cause a stir in your financial condition by wiping out your entire savings.

So, what if someone had told you that you can save tax legally by using health insurance as a weapon? Doesn't it solve both the problems?

Insurancedekho is here to share these secrets of tax-saving with health insurance with you today, that you might be ignoring while financial planning.

But prior to that, let us understand the dual-objective of tax saving-

  • Meeting financial goals when you come across a medical emergency
  • Saving on income tax annually

Now let's check some easy ways to save tax on your hard-earned money and be a good financial planner:

1. Saving tax under section 80DDB (Treatment of critical illnesses)

Section 80DDB of the Income Tax Act covers tax-saving provisions based on the expenses they incur for treatment of certain diseases in particular. So, you get dual benefits-protection against critical diseases and tax deductions of up to Rs. 40,000-Rs. 60,000 for Senior citizens and Rs. 80,000 for very senior citizens. One can avail a tax deduction amounting to Rs. 40,000-Rs. 80,000 in case of a specified illness like cancer, chronic renal failure or Cardiac disease.

It can be availed for self, parents, spouse, children, and siblings by following a mandate of attaching a certificate issued by the doctor while filing an income tax return.

2. Tax planning under section 80DD (Treatment of a dependent with a disability)

In this case, the dependent has/have to be your spouse, parents, children or siblings to be eligible for deduction. If the dependent has a disability of 40% or above, he/she is then the income tax deduction limit is Rs. 75,000 and if the disability of 80% or above, then the deduction amount is Rs. 1,25,000.

Read here: All That You Should Know About Health Insurance for Disabled People

Individuals who are Indian residents, as well as HUFs, can claim deductions under this act whereas non-resident individuals cannot.

3. Saving Tax through Section 80U (Person with disability)

Tax benefits under Section 80U can be availed by someone who is certified with a disability by the medical authority. People can avail a deduction of Rs. 75,000 for people with disability and for Rs. 1,25,000 for people with a severe disability.

If the disability is for more than 80%, it is considered as a severe disability in this section. Disability, for this section, is defined as one of the following:

  • Blindness
  • Low-vision
  • Mental illness
  • Leprosy-cured
  • Hearing impairment
  • Locomotor disability
  • Mental retardation

4. Income tax deduction on Medical Allowance on Section 17

In every financial year, a deduction of Rs. 15,000 is allowed if the medical expenses of you or your family, are paid by your employer by your salary.

To understand the process of tax-saving with health insurance better, refer to the table below:





Health Insurance Premium for Self, Spouse, and Children

Rs. 15,000

Rs. 25,000

Rs. 15,000

Preventive Health Check-up for Self, Spouse, and Children

Rs. 15,000

Rs. 5,000

Rs. 5,000

Total for Self, Spouse, and Children

Rs. 30,000

Rs. 25,000

Rs. 20,000

Health Insurance Premium (Senior Citizen)

Rs. 28,000

Rs. 30,000

Rs. 28,000

Preventive Health Check-up for (Senior Citizen)

Rs. 10,000

Rs. 5,000

Rs. 5,000

Total for Parents (Senior Citizen)

Rs. 38,000

Rs. 35,000

Rs. 30,000

Total Deduction Available for Year

Rs. 50,000

Also Read

Top Tax Benefits Available for Senior Citizens

2019 Top 10 Health Insurance Policies with Tax Benefits

It is often said that one should not invest merely to save taxes. Considering health insurance as an investment, you not only get a health cover with the premium paid, but also aids in saving tax. Thinking about rising hospital costs, buying health insurance is to help. 

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