Want to reduce your tax liabilities? Health insurance can help you

Posted on: Feb 4, 2021 | | Written by:

Want to reduce your tax liabilities? Health insurance can help you

Published on January 18, 2021 | Est Read Time: 3 min

Financial planning has become more necessary than ever. Many believe that an employer health insurance is enough and a personal medical plan isn’t required. Well, that’s a very wrong notion! In today’s time when medical expenses are skyrocketing and increasing at 20% every year, purchasing comprehensive health insurance with adequate cover can go a long way. You must get adequate health insurance cover for self and family even before starting to save for your finances. The premium paid for health insurance also provides a tax benefit by reducing your taxable income and thereby your tax liability. You are saving in the present and also safeguarding for your future.

The premium on your Medical Insurance policy is considered for tax deductions under Section 80D of the Income Tax Act, 1961. Hence, if you buy Health Insurance, you stand to enjoy a host of tax benefits along with insuring your medical spends. The premium amount paid towards the Health Insurance of you and your family including your parents can be claimed as a tax deduction under section 80 D from your taxable income. However, the maximum deduction amount you can claim is based on your age.

Here are the top 5 tax benefits of Health Insurance:

• Tax Benefits on Single Premium Medical Insurance Plans
As per the recent Income tax laws, the health insurance premium paid for a multi-year plan in the lump sum is eligible for a tax deduction under Section 80D. And the tax-deductible amount will be based on the total premium paid for the policy term. This will be subjected to the limits of Rs. 25,000 or Rs. 50,000 as per the case may be.

• Higher Tax Benefit on Senior Citizen Health Insurance Plans
The premium that you pay on a health insurance policy purchased for your parents can be claimed for tax deduction up to Rs. 50,000. Moreover, the tax deduction limit for expenses incurred on specific illnesses of elderly people is up to Rs. 1 lac.

• Preventive Health Check-ups
Expenses incurred on preventive health check-ups are also eligible for tax benefits. However, most of the taxpayers end up paying it on their own. The tax exemption limit is Rs. 5,000. For example, if you have claimed Rs. 23,000 for insurance premium then you can avail Rs. 2,000 on preventive health check-ups. As the overall deduction cannot be more than Rs. 25,000.

• Tax Saving on Diagnostic Tests and OPD charges-
In addition to the hospitalization expenses, tax exemption benefits are also provided on the out-patient department or OPD consultation charges as well as expenses incurred on diagnostic tests. You can avail health insurance tax benefits on cash payments also. Unlike other medical expenses that require payments either through debit/credit cards, cheques, or internet banking to avail tax exemption benefits.

• Exemption on Rehabilitation of Handicapped Dependent Relative
Not many taxpayers are aware of it but expenses incurred on medical treatment of a handicapped dependent relative are also eligible for a tax deduction. Expenses such as nursing, training, and rehabilitation towards them are eligible under the same. The tax exemption limit is Rs. 75,000 if the degree of disability ranges from 40 to 80 %. If there is more than 80% of disability then you can save tax up to Rs. 1.25 lacs.

To avail tax deduction you need to submit the disability certificate from the doctor or hospital.

As you can see there are different tax-deduction limits as per the age of the insured member and the health insurance premium that you are paying. It serves both tax-saving benefits and compensates for medical expenses as well. Investing in a Health Insurance policy provides you the dual benefits of medical security and tax benefits. Here HDFC ERGO can come to your aid and provide you with the health insurance plans that best suits the needs of you and your family. So, when you buy a health plan or if you already have health insurance then make sure that you avail of the above-mentioned tax benefits as well.

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