Save your present and future tax liabilities with health insurance

Posted on: Mar 2, 2021 | | Written by:

Save your present and future tax liabilities with health insurance

Published on January 21, 2020 | Est Read Time: 3 min

We all know that Health insurance is the best way to stay prepared for all future medical expenses. Apart from the obvious benefit of having the financial confidence to take care of your loved ones, a health insurance plan is extremely useful when it comes to beating medical treatment inflation. When scouting for an ideal health insurance plan, you can choose to secure your entire family under the same policy rather than buying separate policies. We all know ‘health is wealth’ and to safeguard our wealth from any medical emergency it is vital to have a health insurance policy. The health insurance premium offers tax benefits under Section 80D of the Income Tax Act. This makes a health insurance policy a beneficial tax-planning tool which is definitely a wise investment to make for your future.

Features of Section 80 D -

• If you have paid a premium on yourself, your spouse, and a child in one financial year then you can claim up to Rs 25,000 in tax breaks. Besides, if you have paid an extra premium amount for your parents, you can claim an extra Rs 25,000 to Rs 30,000 in tax breaks, depending on the age of your parents. Meaning you are eligible for a maximum tax exemption of Rs 75,000 if you have medical insurance.

• In addition to the tax break, you can get by paying the health insurance premium, you can also avail tax exemptions under Section 80DD and Section 80DDB, for any expenses incurred by you for the medical treatment which includes nursing, training, as well as rehabilitation of dependents who are disabled.

• An additional amount of Rs 5,000 is exempted from the parent's annual health checkup.

• However, it is mandatory to get a medical certificate from a government hospital to claim the deduction.

• If the medical insurance premium is paid in cash then there is no tax benefit. Also, the payment must be paid in a form of online bank transfers, cheques, or via debit or credit cards.

Let’s understand the tax benefits with an example:

Vinod is 55 years old and he pays a premium of Rs 21,000 for a Health Insurance policy. He also pays a premium for the medical insurance policy of Rs 45,000 for his mother who is 78 years old.

Let's look into the amount of tax benefit he can avail under section 80D. Vinod can claim the whole amount of insurance premium paid of Rs 66,000 as a deduction under Section 80D, as it is within the allowed limit of Rs 75,000. His gross income is Rs 8 lacs and after the tax deduction under Section 80D his taxable income will be Rs 734000.

Vinod must remember the following points while filing for a claim:
• Health insurance paid for a Government specified health scheme is eligible for a tax deduction
• Health insurance premium cannot be paid in cash to avail tax benefits
• Premium paid for sister, brother, grandparents, uncle, aunts, or any other relative is not eligible for tax benefits
• Premium paid for non-dependent children more than 25 years is not eligible for tax-exemption
• Group Health Insurance premium is not eligible for a tax deduction

Vinod needs the following documents:
The premium payment receipt and policy copy which shows the name of his family members and their relationship along with the age should be preserved to claim the deduction. Along with the policy the medical expenses receipts need to be submitted as supporting documents at the time of claim.

Vinod can follow this process to file in the Income Tax:
Vinod may file the tax online in a few simple steps and claim the exemptions applicable for himself. All he needs to do is create an account on the IT department portal and log in with his Income-tax id and password. The homepage tabs will carry instructions for form filling and importation of documents. He just needs to fill the form and the exemption amount under the necessary columns and import all the supporting documents and submit the tax filing. Voila! Claim Done!

Conclusion:
The government of India has bestowed us with various tax benefits it's upon us to use them wisely and make the most of it. Claiming the tax benefits under Income Tax Section 80 D is hustle free. This is benefit is only available on the ownership of a health insurance policy. So buy the best health insurance plan with all the tax benefits and good coverage for a 360 degree safety.

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