Is health insurance a part of your tax saving plan? If not, think again!

Posted on: Nov 25, 2021 | 3 mins | Written by: HDFC ERGO Team

Is health insurance a part of your tax saving plan? If not, think again!

Published on November 25, 2021. EST READ TIME: 3 minutes

Every year, whenever it’s time to file your income tax return,do you wish you had figured out more ways to save taxes? Well, there are many investment options available these days that can help you do that.But if you wish to kill two birds with one stone, then buying the best health insurance policy is a good idea. It not only shields your savings during medical emergencies, but also saves tax. Let’s delve deep into how that happens.

Tax structure and tax saving measures

If you are a responsible citizen of this country, you pay your taxes on time. You may know that there are different tax slabs and there are two regimes you can opt for. In each regime, the government has designated what amount of income will fall under what percentage of income to be paid as tax. Now, there are ways to reduce your taxable income.

For example, Section 80C of the Income Tax Act allows you to make various investments and get your taxable income reduced up to the limit of INR 1.5 lakh in a financial year. Here you can invest in plans like Public Provident Fund and National Savings Certificate among others. Similarly, there are other sections like 80D, 80EE, and 80G that help you save tax.

Steps to save tax with health insurance

The premium on your medical insurance policy is considered for tax deductions under Section 80D. You can avail up to INR 25,000 for self, spouse, and child and INR 25,000 for parents below 60 years, and INR 50,000 for parents who are senior citizens. For example, Rahul earns INR 8 lakhs annually. If he buys a health plan ofINR 15,000 for himself and his wife each and then INR 60,000 for elderly parents, he will get a tax rebate of 25,000+50,000 i.e.INR 75,000.Which means, his taxable income will become INR 7,25,000.

Benefits of buying health insurance

Now, you might think that Rahul is essentially paying INR 90,000 in health insurance premium annually but what if no one in his family gets ill that year?Is he is wasting a big amount for no real benefit?No, he is not! Rahul is making sure that no medical emergency ever puts him under extreme financial strain. Here’s why Rahul is making a wise decision:

• Due to advancements in the medical sector, the price of healthcare facilities is exponentially rising. Which means, even a minor emergency can lead to a major financial setback.

• A health plan covers hospitalisation expenses and the costs incurred before and after it for a certain period.

• It provides benefits like a large network of hospitals that allows you to get cashless treatment at the nearest hospital.

• The insurance also provides coverage for alternate treatments.

• You get free medical check-ups.

• It comes with lifetime renewability.

• You get reimbursed for ambulance charges within the same city and even for Air Ambulance in case of an emergency if the policy wording mentions it.

• The best health insurance policies allow customisation as per your needs and budget.

• For every claim-free year, you get rewarded with discounts.

Conclusion

It is important to note that the payment for the premium should be done through a non-cash mode to be eligible for tax deduction under Section 80D. And many sub-sections talk about specific age groups and types of illness. You should research well before buying the best health insurance policy that helps you save tax too. '

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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