How to Save Tax with Health Insurance?

For every individual, securing the healthcare of oneself and family is a top priority. Especially with the rise in multiple lifestyle diseases and in the new normal post-Covid-19. Alongside healthcare, tax-saving is an essential part of an individual’s financial planning. A Health Insurance policy helps achieve these dual objectives with its numerous benefits. 

Under section 80D of the Income Tax Act, 1961, some important norms allow you to avail tax savings on the premium paid for one or more health insurances purchased for your spouse, children, or parents. Following are some of the provisions enabling tax exemption – 

1. Preventive Health Check-Ups 

During your policy term, you can save on your income taxes based on the expenses incurred for preventive health check-ups. If you are below 60 years of age, the tax exemption limit is Rs. 25,000 and Rs. 30,000 for senior citizens. Further, every year you can claim an additional coverage benefit of Rs. 5,000 against preventive health check-ups.

2. Health Insurance for Parents

If you are paying the premium availed by any of your parents aged 60 years and above, you will be eligible for an additional tax saving benefit of up to Rs. 50,000 each year. This additional deduction under section 80D comes in very handy.

3. Policy Premium Payment Mode

For availing of the tax benefit, the policy premium payment mode plays a vital role. The premium should be paid through banking modes such as cheques, demand drafts, net banking, debit or credit cards, etc. However, if you’re getting a preventive health check-up, you can make the payment in cash as well. 

4. Critical Illness Cover

You can also avail tax deduction between Rs. 40,000 and 80,000 for treatment of critical illness. Under section 80DDB, this tax-saving benefit is covered under the critical illness policy.

5. Disability Cover

Under section 80DD you can save tax on the treatment of a dependent with a disability. The insured will be eligible for a deduction of up to Rs. 75,000. Furthermore, under section 80U you can save tax for a person with a disability as they are allowed a tax deduction of Rs. 75,000 or Rs.1.25 Lakh (in severe cases).

6. Medical Allowance

Under Section 17 also you can save tax on medical allowance with deduction eligibility of up to Rs. 1500 every year. 

Investing in a health insurance policy benefits you with medical security and tax exemption. Pick what’s best and most suitable for you and enjoy the tax benefits. But, despite the aforementioned benefits, secure health should be the primary reason for buying health insurance and not saving taxes. It is crucial to provide the best medical assistance for you and your family during any health crisis. Therefore, quality & affordable healthcare services should be the top motivation to buy a health insurance policy. Cholamandalam MS aids you with the same and more with its health insurance plans. Stay informed, Stay Smart for you and your loved ones!

Originally posted 2021-10-28 12:35:18.