How can Health Insurance get you Income Tax Benefits?
Medical inflation is the pivotal reason behind the rising cost of healthcare treatments. Healthcare inflation is also the most significant eroding factor in your savings, especially if you don’t have any health insurance. The sudden outbreak of the COVID-19 pandemic has realized the importance of health insurance and how costlier your treatment will be if you don’t have any health insurance policy. Thus, to stay protected against various diseases, including the COVID-19, everyone should purchase health insurance policies that offer adequate coverage. By buying health insurance policies, you can even save tax. Thus, health insurance benefits in income tax are other essential factors that you should consider while making your investment portfolio.
These days, many private companies are also offering health insurance policies to their employees. These policies cover basic health issues, disease, and even an accident for employees and their dependents. However, this policy will be annulled if the employee leaves or shifts to another organization. So, everyone should purchase a separate health insurance policy rather than depending on their company for the same.
Health Insurance Income Tax Benefits
A person is eligible for deduction under section 80 D income Tax Act against his entire health premium payments made during the year.
Income Tax Benefits for Parents
Under section 80 D Income Tax Act, you can raise a claim deduction for your parents. But for your parents-in-law, your wife can make a claim if she is working instead of you. By buying health insurance policies for her parents, she can initiate a claim for up to Rs. 50,000. You can maximize your tax savings under 80 D deductions by opting for health insurance policies for all family members.
According to the Income Tax law, by paying premiums for either your single parent or both parents, you can make a claim deduction of up to Rs. 25,000. If your parents are senior citizens (above 60 years), then you can increase this claim up to Rs. 50,000.
Once you have purchased a health insurance policy for your entire family, you must focus on maximizing your deduction benefit.
- Pay Rs. 25,000 premium against the coverage for self, spouse, and dependent children.
- An additional premium of Rs. 25,000 to cover your dependent parents (less than 60 years)
- Or pay an additional premium amount of Rs. 50,000 to cover dependent parents (senior citizens, more than 60 years)
You will be eligible for these tax deductions if you make your payments online or through debit, credit card, or net banking. However, no tax deduction is applicable if your payment mode is cash.
Based on the effective rate (applicable to the individual), a tax-saving deduction for a person is calculated. Suppose a person has an effective tax rate of 31.2%, then his/her tax savings will be nearly Rs. 23,400 {[Rs. 25,000 (self and spouse) + Rs. 50,000 (parents)] *31.2%}.
Let’s illustrate this with an example. Suppose Ramen is a 45-years-old guy who works in a private firm. His father’s age is 71. Ramen purchased health insurance policies for himself as well as his father. For these policies, he is paying premiums of Rs. 30,000 and Rs.45,000, respectively per annum.
Under this scenario, Ramen can initiate a claim deduction of Rs. 25,000 for himself as per 80D. Again, he can make a claim up to Rs. 50,000 for his father as he falls under the category of a senior citizen. But in the above scenario, he can claim a tax benefit of Rs. 45,000 only. So, his total tax deduction will be Rs. 70000 (Rs. 25000+ Rs. 45000).
How to Save Taxes on Your Medical Care Expenditures
- Regular healthcare expenses
If you are a salaried employee, then you can save tax up to Rs. 15000 for your regular healthcare expenses. These healthcare expenditures could be your pharmacy bills, medical checkup bills, doctor’s consultation fees, and so on. This tax benefit is applicable for your family, yourself, spouse, children, or parents.
- Preventive healthcare checkup
You are eligible for a tax deduction for any preventive medical checkup of any of your family members. You can claim up to Rs. 5,000. You just need to submit all original receipts to your company after collecting them from the lab.
- Maintenance or Medical Treatments for Disabled Dependents
If you are handling disabled dependents, then you need to pay a humongous amount for their treatment. Here enters section 80D of Income Tax Act 1961 that welcomes you with a fixed deduction of Rs. 50,000. Any family member, including your spouse, child, parent, brother, or sister, could be your dependent. If the disability is above 80 percent, then you may claim up to Rs. 1 Lakh per annum for tax deduction from your income. By submitting a medical certificate of disability from a government hospital, you can raise this claim. You also need to do a self-declaration where you need to include the treatment method, training, and other medical expenditures to treat your dependent.
- Medical Treatment for Dependents with Specified Diseases
If you or your dependent family members are suffering from specified diseases above 40 percent disability, then you can claim a tax deduction. You can initiate a claim under section 80DDB of the Income Tax Act. The specified diseases could be cancer, AIDS, chronic renal failure, hemophilia, thalassemia, and neurological disorders. By submitting original prescriptions and bills along with Form 10-1 from a relevant specialist doctor, you can make this claim.
Health insurance has become a popular word after this lethal COVID-19 outbreak. By purchasing health insurance plans, you can save taxes on your income. But don’t consider it for only tax-saving purposes; instead, you should adopt health insurance policies to enhance the protection of your family against various diseases.
