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This tax season, health insurance can help you

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Published on March 19, 2021 | Est Read Time: 3 min

Health insurance is useful and in today’s era of pandemic we all must have one to stay secured. People are informed and they find the right health insurance which best suits their requirement. But we often forget that it can be helpful in saving taxes!

It's the month of March; everyone is looking to save taxes. It's the season of closing, taxes, appraisals etc. So, it’s the ideal time for you to pull up the socks and save taxes using health insurance. The premium paid towards health insurance qualifies for tax deduction under section 80D of the income tax act 1961. It reduces your tax liability, and hence health insurance is a vital to grow your savings and ensure your financial stability. 

What is Section 80D?

We all know health is wealth, and to safeguard our wealth from any medical emergency, it is vital to have a health insurance policy. In today's time, where medical expenses increase at an alarming rate, purchasing a comprehensive health insurance plan is a must. By purchasing a health insurance plan, you are safeguarding your future and saving money in the present. Now how is that possible? Under Section 80D of the Income Tax Act, 1961, the government gives citizens a tax exemption if they have applied for health insurance.

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 50,000 in tax breaks, depending on your parents' age. Meaning you are eligible for a maximum tax exemption of Rs 1,00,000 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. 

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

• An amount of Rs 5,000 is exempted from the parent's annual health checkup (included in the overall limit of INR 1 Lac). 

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

Let's understand the tax benefit with a suitable example:

Rohit (Aged 40 years) opted for a health insurance plan covering himself, his wife (aged 36 years), and his child (aged 8 years). He pays an annual premium of Rs 25,850. He also pays a health insurance premium of Rs 45,000 for the mediclaim policy covering his elderly father (67 years) and mother (62 years).

• The deduction Rohit is eligible to get for the health insurance policy that covers self, spouse, and child is up to Rs 25,000

• The maximum deductible he is eligible to get for the parents' mediclaim is up to Rs 50,000. So, the deduction he can claim in this case is Rs 45,000. 

While we all understand the importance of a health insurance policy that secures our present and future, we must note the various benefits that it can offer. We can save a significant amount by claiming the benefits we are entitled to. Take advantage of the tax benefits under section 80D and save in the present as you plan for the future! 

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

 Subject to change in tax laws.

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