At the end of every financial year, people rush blindly to buy financial products to save tax without any planning for the long run. The Income Tax Act of India allows you to save tax via provident funds, saving certificates, ELSS, etc. One of the safest and the best ways to save tax is by opting for a medical insurance policy. With the appropriate health insurance policy, not only do you save a considerable amount on taxes, but you can also protect your finances against alarming medical costs that are bound to burn hole in your pocket if you are sick and have an accident. Here is a low down of how you can save tax through health insurance.
Tax Benefits of Health Insurance
Along with ensuring financial protection during medical emergencies, health insurance policy also provides a dual benefit of tax saving. Here are some of the key features that you need to know about:
- The premium paid towards health insurance is covered under Section 80D of the Income Tax Act, 1961. This is available only to individuals and (HUF) Hindu Undivided Family members.
- You can save tax up to Rs 15000 in respect of the medical insurance premium paid for yourself, your spouse and the dependent children.
- For senior citizens (above 60 years), Section 80D extends the limit is extended to Rs 20000.
- The health insurance policy could either be an individual medical plan or a floater plan that covers you, your spouse, children and parents.
Health Insurance for Parents: Tax Benefits
What most people don’t know is that you can claim an additional deduction of Rs 20000 for the premiums paid towards parents’ health insurance, in case the parents are above 65 years old. If both parents are less than 60 years old, an additional Rs 15000 deduction is available. This allows you to save tax while ensuring that your parents’ health healthcare costs are covered.
Health Insurance and Tax Saving: What is Not Covered
While health insurance can help you save tax, there are certain things that you need to keep in mind while opting for the policy. These include:
- Cash payments of the health insurance premium are not eligible for tax deductions.
- Section 80D does not include group health insurance plans, i.e. corporate plans that are taken by the company on behalf of the employees.
- The premiums have to be paid from your taxable income.
- You cannot claim tax benefit on health insurance premium paid for your in-laws.
- Proof of payment of premium has to be furnished, in order to avail the tax benefit.
Medical emergencies can strike a person any time anywhere. This is why you need health insurance policies to secure yourself and your dependants against illnesses and provide financial protection when treatment is required. A health insurance policy can provide a cover for hospitalization expenses related to accident and sickness. Moreover, with its cashless network of hospitals, you are ensured of immediate treatment without having to pay more out-of-pocket expenses.
Health insurance, also known as mediclaim, is not a luxury any more. It is a necessity for families that want to ensure that they get quality health care when needed. To promote health insurance in India, the government has introduced tax benefits on health insurance. To save tax and avail various benefits of medical insurance, it is advisable for families to incorporate a health plan in the financial plan.