At the end of every financial year, people rush to buy financial products to save tax without planning for the long run. One of the safest and the best ways to save tax is by opting for a health insurance policy. With the appropriate health insurance policy, you not only save a considerable amount on taxes, but you can also safeguard your finances against alarming medical costs that are bound to burn a hole in your pocket, if you fall ill or have an accident. Here are some smart tips on how you can save tax through health insurance.
Tax Benefits of Health Insurance
Along with ensuring financial protection during medical emergencies, a health insurance policy also provides the benefit of tax saving. The premium paid towards health insurance is covered under Section 80 D of the Income Tax Act, 1961. The tax benefits can only be availed if you are the proposer of the policy.
Following are the tax exemption limits as per the budget of 2018:
- You can claim tax deduction up to INR 25,000 per year for the health insurance premium paid for yourself, if your age is less than 60 years.
- If you are a senior citizen, i.e. your age is more than 60 years, then you can claim the tax benefit up to INR 50,000.
- An additional deduction in tax up to INR 25,000 can be claimed, for the health insurance premium paid for your parents, if your parents are not above 60 years of age. This limit increases to INR 50,000, if your parents are senior citizens.
- The tax exemption limits mentioned above also include the expenses incurred for preventive health checkups, with a maximum cap of INR 5,000.
The health insurance policy could either be an individual medical plan or a floater plan that covers you and your family (your spouse, children and parents). The maximum deductions that can be availed are of INR 1 lakh, if you buy the health insurance for yourself and your loved ones, and you and your parents are senior citizens.
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 premium amount can’t be claimed under section 80 D of the Income Tax Act, except for the expenses of preventive health checkups.
- Section 80 D does not include group health insurance plans, i.e. corporate plans that are taken by the company for their 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 you any time & anywhere. Thus, you need health insurance policies to secure yourself and your dependents in case of medical emergencies and provide financial protection when treatment is required. Moreover, with cashless network of hospitals, you are ensured of immediate treatment without having to pay more out of your pockets.
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 their financial plan.