How to Make the Best Out of Your Health Insurance this Tax Season

As the tax season kicks off, almost everyone is busy in completing the formalities to save maximum on tax. But how many of you know that your health insurance plan comes with an additional benefit, the Tax Benefit?

Experts say that having health insurance is the first step towards financial planning. It can be for self, family or elderly parents. Health insurance usually pays for the unexpected hospitalisation expenses arising out of an accident or illness. Besides saving one from such a trauma, it can be a solid tax-saving tool. Section 80D of the Income Tax Act, 1961 states that the premiums paid for health insurance are exempt from paying taxes. Therefore, while medical insurance gives you the much-needed mental peace, it also helps save your huge chunk from going into the pool of tax.

Let’s dive into details to utilise the most out of it:

What is Entailed by Section 80D?

Section 80D, Income Tax Act defines the tax deductions one can enjoy on mediclaim insurance. So, if you own health insurance, as per this section, you can claim up to a specific limit for tax exemption, for the premiums paid for self, spouse, dependent children or senior citizen parents. The limit is Rs. 25,000 for self and spouse while in case of elderly parents it is Rs. 30,000. The maximum that can be claimed is Rs. 65,000.

Deductions to be Claimed

Here are the deductions you can consider to bring down the taxable income.

• Deduction on preventive Healthcare Checkups: You can claim up to an additional Rs. 5000, apart from claiming Rs. 25000/30,000 for the premiums paid for self or senior citizen health insurance plan.

• Deduction for premiums paid for the Parents: Claim up to Rs. 30,000 for the premiums paid for health insurance owned by senior citizen parents

• Deduction under Section 80DDB: You can claim up to Rs. 1.4 Lakh for the treatment of certain specific illnesses. The tax exemption that can be earned is Rs. Rs. 60,000 for senior citizens and Rs. 80,000 for super senior citizens.

• Deductions under 80DD: This section provides additional deductions in case of a differently abled dependent. The dependent can be a spouse, children, parents or siblings. To avail the benefit, the taxpayer has to submit the supporting medical certificate from an authorised practitioner. The maximum tax benefit offered under this clause is Rs. 75,000 on the treatment expenses incurred for the handicapped dependent with 40% disability. In the case of severe disability with 80%, the maximum deduction that can be earned is Rs. 1,25,000.

• Section 80D Limit: The maximum limit that you can claim under Section 80 D is mentioned in the below table:

This can be explained with an example:

If you’re a senior citizen and paying an annual premium of Rs. 30,000 for yourself and dependent, you are also paying Rs. 25,000 for your super senior citizen parents. When we consider the premiums for exemption, the total claimable amount comes as Rs. 55,000, the benefit of which can be availed fully, as the maximum limit that you can claim is Rs. 65000.

In a Nutshell!

Apart from securing your finances in case of an eventuality, the tax benefit offered under health insurance is icing on the cake. So, as the tax season is approaching, do consider your health insurance to make a maximum of it!