Clipped from: https://www.financialexpress.com/sponsored/health-insurance-with-tax-benefits/2993640/
These tax advantages are available if you acquire the coverage for yourself and your parents, dependent kids, and spouse. Please continue reading to learn more about it in detail and depth.
Health Insurance with Tax Benefits
Health insurance plans provide two advantages for the price of one. They provide you with not only much-needed financial stability through a range of coverage advantages but also income tax benefits on the premiums you pay under the 1961 Income Tax Act (Section 80D). These tax advantages are available if you acquire the coverage for yourself and your parents, dependent kids, and spouse. Please continue reading to learn more about it in detail and depth.
Tax Saving Options with Medical Insurance
Medical insurance policies are beneficial not just in terms of reimbursing medical bills but also as a tax-saving strategy. The 1961 Income Tax Act (Section 80D) provides policyholders with a significant tax credit for medical premiums paid to purchase medical insurance. Whether salaried or self-employed, policyholders are eligible for tax advantages under the Act. On availing of income tax benefits, policyholders are given the benefit of tax deductions and health coverage.
Every medical insurance plan, whether owned by the proposer, their children, parents, or spouse, is eligible for tax advantages. When purchasing medical insurance for parents, however, look for higher tax advantages as well as coverage for the broadest range of medical conditions. It’ll aid in the selection of the most appropriate health insurance coverage.
Income Tax Exemption under the 1961 Income Tax Act (Section 80D)
The premium amount paid for a medical insurance policy is deducted from taxable income under the 1961 Income Tax Act (Section 80D). The maximum deductible amount is ₹25,000, which can be increased to ₹50,000 for elderly persons (from 1 April 2018).
The policyholder can now deduct up to ₹75,000 from their taxable income. In exceptional situations, when the proposer and his parents are over 60, the deductible can be increased to ₹1,00,000 (₹50,000+₹50,000).
Various Tax Saving Options under Section 80D
The following are the different scenarios where a policyholder may save tax under the 1961 Income Tax Act (Section 80D):
- You and your parents under 60 years are eligible for up to ₹25,000 in claims for yourself, your dependent children and your spouse. Additional claims of ₹25,000 are permitted against the premium paid for parents. The whole sum is ₹50,000.
- You and your family are under 60 years, but your parents are over 60 years. You may claim up to ₹25,000 against premiums paid for yourself, your family, and your children. A claim amount of ₹50,000 for the premium paid for parents. The whole sum is ₹75,000.
- If your parents are beyond 60 years, you may claim a maximum of ₹50,000 claims against the insurance premiums paid for yourself, your spouse, your parents, and your dependent kids. Furthermore, parents can receive up to ₹50,000 for premiums paid. The whole sum is ₹100,000.
- In the case of HUF (Hindu Undivided Family), you may claim a maximum of ₹25,000 in exchange of the premium paid for yourself, your family, and your dependent kids and ₹25,000 (insurance premiums paid for your parents). Total tax advantages for parents = ₹25,000, solely accessible if your parents are senior citizens of India.
- In the case of Non-Resident Individuals, you may claim a maximum of ₹25,000 for insurance premiums paid for yourself, your family, and your dependent kids. Parents are only eligible for tax breaks if they’re over 65 years. As a result, the total sum is ₹25,000.
Documents Needed to Claim Tax Deduction
The only papers needed to claim the deduction are your copy of your insurance policy and premium payment receipt that displays your family member’s names, your relationship with them, and their ages. If you have paid the premium for your parents’ policy, you must get an 80D certificate from the insurer by giving payment information in your name.
Points to Keep in Mind when Availing Tax Benefits
The following are some things to keep in mind if you want to take advantage of tax breaks under the 1961 Income Tax Act (Section 80D) for health insurance plans:
- Examine the tax exemptions in your insurance thoroughly.
- Avoid paying premiums in cash.
- If you obtain health insurance for yourself or your parents and both of you are senior citizens, the maximum deduction under section 80D is ₹1,000,000.
- Hindu Undivided Family can also claim this deduction for premiums paid to insure any member of the HUF’s health.
- To qualify for the deduction, the premium must be paid in a method other than cash. On the other hand, preventive health check-ups can be paid in cash.
- The money available for senior citizens’ deductions can also be used for medical costs.
- A single payment for health insurance provides tax benefits for the number of years of coverage.
The Bottom Line
Overall, health insurance plans are, without a doubt, one of the most efficient strategies to save taxes while safeguarding your funds from spending on medical bills. They also assist you in lowering your tax liability by allowing you to deduct up to ₹1 lakh from your taxable income under the 1961 Income Tax Act (Section 80D).
As a result, getting health insurance coverage as soon as possible is advised to have a healthy and secure future. You may purchase it from prominent insurance carriers like Tata AIG and others in India, as they offer a range of health plans at affordable rates. Also, remember to use their online health insurance calculator to know the premium rates of several policies and select the one that best fits your budget.