Maximise your income tax savings with strategic health insurance investments. Before delving into health insurance for tax planning, being well-informed is crucial. Tax saving is integral to financial planning, serving the dual purpose of meeting financial goals during medical emergencies and securing annual tax deductions. Opting for the best health insurance reduces tax liability and ensures comprehensive coverage for medical emergencies.
This investment option stands out in the market, offering many benefits, including coverage for medical treatments in unforeseen circumstances. Additional advantages encompass tax benefits, cashless hospitalisation, coverage for domiciliary treatment expenses, and more. Make a wise investment that safeguards your health and optimises your financial strategy.
Save Taxes on Premium Payment
As a policyholder, you are eligible for an annual deduction of up to ₹25,000, contingent upon the premium paid for your health insurance. The coverage extends to you, your spouse, and dependent children. For senior critical illness insurance plans, individuals aged 60 and above enjoy an increased tax benefit limit of up to ₹50,000. This limit is further augmented by an additional coverage of ₹5,000 for health check-up expenses incurred by family members, encompassing parents, spouses, and dependent children.
a) Tax Savings through Preventive Health Checkups
You can optimise your income tax savings by accounting for expenses related to preventive health checkups during the policy term. The tax exemption limit stands at ₹25,000 for individuals below 60 years of age and extends to Rs. 30,000 for senior citizens under Section 80D of the Income Tax Act, 1961. Additionally, you can claim an extra benefit for coverage against preventive health checkups, with an annual limit of ₹5,000.
b) Tax Advantage for Parental Health Insurance Plans
Section 80D of the Income Tax Act of 1961 provides an added tax-saving advantage if you contribute to your parent’s health coverage premium. The deduction can go up to ₹50,000 per year for parents aged 60 years and above. You can save up to ₹50,000 annually for each parent.
c) Digital Payments for Tax Benefits
To avail of tax benefits, the premium for a best health insurance policy must be paid through designated banking channels like demand drafts, cheques, debit or credit cards, or net banking. Notably, expenses incurred for preventive health checkups remain eligible for income tax savings, even if paid in cash.
Utilise Tax Benefits According to Section 80DDB (Critical Illness Treatment)
Beyond safeguarding you from critical diseases, your health insurance policy offers tax deductions of up to ₹40,000, ₹60,000 for senior citizens, and ₹80,000 for very senior citizens. When medical expenses arise due to specified illnesses like cancer, chronic renal failure, or cardiac disease, you can claim a tax deduction ranging from ₹40,000 to ₹80,000. The list of eligible illnesses is detailed in Rule 11DD. To avail of these benefits, attaching a doctor-issued certificate while filing your income tax return is essential. These deductions apply to self, spouse, parents, children, and siblings.
Strategise Tax Planning Under Section 80DD (Dependent with Disability Treatment)
If you incur treatment expenses for a dependent with a disability (limited to your spouse, parents, children, and siblings), you qualify for a deduction of up to ₹75,000. For medical treatment, training, rehabilitation, nursing, and maintenance expenses related to a severely disabled dependent, a caregiver can claim a tax deduction of up to ₹1.25 lakh.
Eligibility for Tax Deduction under Section 80D
The premiums directed towards your health insurance coverage are exempted from your income tax obligations in a specific financial year. If you hold a family floater health insurance plan that encompasses you, your spouse, and your children, the premiums for coverage individual family members enjoy can reduce your overall income tax liability. This section of the income tax act extends its benefits to the following family members:
- You (the policyholder)
- Your spouse
- Your children
- Your dependent parents
Hindu Undivided Families (HUF) can also claim tax benefits under this section, based on the individual premium paid for each member, with the caveat that the total tax benefit remains within the prescribed upper limit.
Wrapping Up
Understanding and leveraging the tax benefits associated with the best health insurance in India is not just a financial strategy but a prudent and responsible approach towards securing our well-being and mitigating unforeseen medical expenses. By navigating the nuances of different sections, individuals can optimise their tax planning while ensuring comprehensive coverage for themselves and their families.
The key lies in informed decision-making, from choosing the right health insurance policy to maximising deductions within the stipulated limits. As health remains a cornerstone of a prosperous life, harnessing these tax benefits is a dual investment – safeguarding our health and optimising our financial resilience.
