As we head into the New Year, it can pay big dividends to spend a little time seeing if any year-end move can help you save a lot on taxes or improve your financial situation. One of the most prominent ways to save yearly tax is by investing your money in risk control investment product – Health Insurance. Health insurance, apart from saving you from the massive cost of medical expenses in case of an adversity, even helps you enjoy tax rebate. As per the Finance Act (India), premium paid towards medical insurance offers tax benefits under Section 80D of the Income Tax Act. Here are the different ways to save income tax with health insurance.
Health Insurance for Self
You as an individual or Hindu Undivided Family can claim a deduction up to Rs 25,000 under the Section 80D when buying health insurance for self, spouse and children.
For instance, if Ajay’s age is 38, his wife Preeti’s age is 34 and their son Krishiv’s age is 4 years, the maximum deduction that Ajay can claim for his family’s health insurance is Rs 25,000.
Health Insurance for Self and Parents (Below 60)
If you have a family as well as dependent parents, you can avail an additional deduction of Rs 25,000 for buying health insurance for your parents. In total, the overall deduction that can be claimed is Rs 50,000.
For instance, apart from his family, Ajay has dependent parents – father (59) and mother (57), Ajay can avail an additional benefit of Rs 25,000 for buying health insurance for parents. The total benefit Ajay can avail becomes Rs 50,000, i.e. Rs 25,000 (self) and Rs 25,000 (parents).
Health Insurance for Self and Parents (Above 60)
If you have dependent parents and the age of any of the parents is above 60, you are allowed for a tax benefit of up to Rs 50,000. Here, the total tax benefit goes to Rs 75,000.
For instance, apart from your family, you have dependent parents — father aged 71 and mother aged 68, you can avail an additional benefit of Rs 50,000 for buying health insurance for your parents. The total benefit that you can avail is Rs 75,000 i.e. Rs. 25,000 (self) and Rs 50,000 (senior citizen parents).
Health Insurance for Self (Above 60) and Parents (60)
Where one family member— self, spouse or children— is over 60, one can claim up to Rs 50,000 in tax benefit on medical insurance. Additionally, for parents over 60, medical insurance paid can fetch up to Rs 50,000 in tax benefit. So, the total deduction in this case can be up to Rs 1 lakh a year.
For instance, your age is 65 and your father’s age is 90. In this case, the maximum deduction you can claim under section 80D is Rs 1 lakh i.e. Rs 50,000 (senior citizen self) and Rs 50,000 (senior citizen parents).
Deduction on Preventive Health Check-up
Apart from regular health insurance, any payments made towards preventive health check-ups also entitle you to a tax deduction of up to Rs 5,000, which though fall within the overall limit of Rs 25,000/ Rs 30,000 as the case may be. The deduction can be claimed either by you, spouse, dependent children or even parents.
For Instance, Abhay paid a health insurance premium of Rs 22,000 towards the insurance policy he bought for himself, his wife and his dependent kid. Further, he even got a health check-up done for himself and his wife for which he paid Rs 5,000.
Now, Abhay can claim a maximum deduction of Rs 25,000 under Section 80D of the Income Tax Act. While Rs 22,000 has been allowed towards insurance premium paid, Rs 3,000 has been allowed for the health check-up. The deduction towards preventive health check-up has been restricted to Rs 3,000 as the overall deduction cannot exceed Rs 25,000 in this case.