Do You Want to Know How Health Insurance Might Help You Save Money on Taxes in India?
The first step in any financial strategy, according to most financial advisers, should be to guarantee that one has enough health insurance. Even before beginning to save for one’s goals, one must have proper health insurance coverage for oneself and one’s family.
Furthermore, paying for health insurance gives a financial benefit by lowering your taxable income and, as a result, your tax liabilities.
What are the Limits for Tax Benefits?
Here are the tax benefit restrictions that a person should be aware of before beginning to use tax-saving methods in health insurance –
- If the individual is under the age of 60, the maximum deduction for health insurance premiums paid for oneself, partner, children, and parents is Rs. 25,000 per year.
- The most a person can pay for a policy that covers his or her parent (a senior citizen aged 60 or more) is Rs. 50,000. Overall, the maximum tax advantage is Rs. 75,000 if a taxpayer is under the age of 60 and his parents are over the age of 60.
- Taxpayers aged 60 and above who pay the premium for their parents are eligible for a tax credit of up to Rs. 1 lakh.
Legal Ways to Save Tax with Health Insurance:
Here are some crucial considerations that can help a person legally save taxes without anxiety. You can take advantage of tax breaks based on your specific requirements and circumstances by doing the following:
Preventive health check-up
Preventive health checkups may assist you in saving money on taxes. Based on your preventative health check-up expenditures during the insurance period, you can save an additional income tax benefit of up to Rs. 5,000. According to Section 80D of the Income Tax Act, the tax exemption limit for individuals under the age of 60 is Rs. 25,000 for those under the age of 60, and Rs. 30,000 for senior people.
Health insurance for parents
You can claim a tax credit under Section 80D of the Income Tax Act of 1961 if you pay the premium for health insurance that covers your parents. Remember that either of your parents over the age of 60 can save up to Rs. 50,000.
Policy premium payment
Every health insurance policyholder should be informed that to earn a tax break, their premiums must be paid through a demand draught, credit card, debit card, or net banking. Paying for health insurance premiums with cash may preclude you from receiving benefits. Cash payments for preventative health check-ups, on the other hand, can be deducted from your tax liability.
Section 80DDB can also be used to deduct the expense of critical illness insurance. The insured is eligible for a tax deduction ranging from Rs. 40,000 to Rs. 80,000 for critical sickness treatment. You can also deduct the cost of caring for a disabled dependent under Section 80DD. In this case, the insured is eligible for Rs. 75,000 discount. A person with a disability can also save money on taxes by filing Form 80U. A disabled person is eligible for a deduction of Rs. 75,000 or Rs. 1.25 lakh (in severe cases). Medical expenses can be deducted from your tax liability under Section 17 of the Internal Revenue Code. You will be entitled to claim a deductible of up to Rs. 15,000 per fiscal year.
No Benefits on Cash Payment
To receive the tax benefit, the premium for a health insurance policy must be paid using one of the following banking methods: demand draught, check, debit or debit cards, or net banking. However, you may be able to save on income taxes if you incur charges for preventative health check-ups that were previously paid in cash.
Determine what’s possible for you or which conditions you meet now that you’re aware of the tax benefits of health insurance. While you’re doing it, keep in mind that you won’t be able to deduct insurance premiums from your taxes.
Smriti Gala works as a Digital Marketing Manager with Coverfox. As her life turned upside down when COVID severely afflicted her family members, Smriti decided to dedicate her expertise towards informing and educating the masses about the importance of health insurance. When she is not actively writing enlightening content, our ‘monk marketer’ likes to meditate, meet new people and explore less traveled territories.