How to Save Tax With Health Insurance?
Updated On Mar 02, 2021
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Are you looking forward to buying health insurance? Do you see health insurance as one of the best ways to secure the health and savings of your loved ones? If so, here's good news! You can also make the most of your health insurance by saving tax. In case you are new to the world of health insurance, know that the premium paid towards health insurance policies qualify for deduction under Section 80D of the Income Tax Act. The benefit is available on health insurance policy premium paid for self, spouse, children as well as parents. Note that it does not make a difference whether the children or parents are dependents or not.
Limits for Tax Benefits?
Before you go ahead with implementing ideas for tax saving in your health insurance, take a quick look at these tax benefit limits:
1. The maximum deduction one can avail on the health insurance policy premium paid for self, spouse, children, and parents is Rs. 25,000 per year, on the condition that the age of the individual should not be more than 60 years.
2. In case, an individual pays the premium for a policy covering his or her parent (senior citizen of age 60 or more), the maximum is capped at Rs. 50,000. On the whole, the maximum tax benefit a taxpayer can get is Rs. 75,000, if his age is below 60 while the age of parents is more than 60.
3. Taxpayers who are 60 or more years old, paying the premium for their parents, can avail the maximum tax benefit of a total of Rs. 1 Lakh.
Ways to Save Legally Save Tax With Health Insurance
Below mentioned are the key elements that can help you legally save taxes without any concern. Based on your specific requirements and situation, you can make the most of tax benefit through:
1. Preventive Health Check-up: Preventive health check-ups can help you save taxes. Based on your expenses incurred on preventive health check-ups during the policy term, you can save an additional income tax benefit of up to Rs. 5,000. In general, the limit of tax exemption for individuals below 60 years is Rs. 25,000 and Rs. 30,000 for senior citizens, as per Section 80D of the Income Tax Act.
2. Health Insurance for Parents: The Section 80D of the Income Tax Act, 1961 allows an individual an additional tax saving benefit if they pay the premium for a health insurance policy covering the parents. Remember, you can save up to Rs. 50,000 for either of your parents having age 60 years and above.
3. Policy Premium Payment Mode: It is important for every health insurance policyholder to note that to the avail tax benefit, it is significant to make policy premium payment using demand draft, credit card, debit card, or net banking. Usage of cash to pay health insurance policy premium can prevent you from benefiting the same. Nonetheless, you can save tax for expenses incurred on preventive health check-ups for which payment is done in cash.
What Else You Should Know About Saving Tax?
1. You can also save tax for critical illness policy under Section 80DDB. The insured is allowed a tax deduction between Rs. 40,000 and Rs. 80,000 for treatment of critical illness.
2. You can also save tax on the treatment of a dependent with a disability under Section 80DD. The insured is eligible for a deduction of up to Rs. 75,000 in this case.
3. You can also save tax through Section 80U for a person with a disability. A person with disability is allowed a tax deduction of Rs. 75,000 or Rs. 1.25 Lakh (in severe cases).
4. You can also save tax on medical allowance under Section 17. You will be eligible for a tax deduction of up to Rs. 15,000 per financial year.
Now that you are aware of the tax-saving feature with health insurance, go ahead and find what’s feasible for you or which condition you fulfill. While moving ahead, do not forget that you cannot gain tax benefits for a policy premium paid for siblings.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.