As the fiscal year comes to an end on March 31, many of us are bound to get in the customary rush to look for ways that maximize our tax savings. While you are looking for ways to invest your hard-earned money properly, you should also ensure your family’s future is secured. Health insurance is an often overlooked but extremely valuable avenue of financial security and tax savings. It not only reimburses medical expenses as per the policy but also gives us the opportunity to save money on taxes by allowing deductions under Section 80D of the Income Tax Act. In this article, we will understand how buying health insurance can help one save on taxes.
Understand Health Insurance
Considering the number of various lifestyle diseases one is having along with the inflating health care cost, it has become imperative that one protects oneself financially as well as their family financially security. While following the “try to live a healthy lifestyle ” mantra goes without saying, getting a health insurance policy acts as an umbrella cover for your financial needs in case of a medical emergency. The premium for your medical insurance policy is eligible for an 80d deduction under the Income Tax Act, of 1961.
The premiums paid for health insurance for you and your family, including your parents, can be deducted from your taxable income. However, your age determines the maximum deduction amount you can claim.
Understanding Section 80D
Health insurance premiums are eligible for 80d deduction. This clause permits individuals to deduct up to Rs. 1 lakh per year for health insurance premiums paid for themselves, their spouses, children, and parents.
Below we will understand the various provisions of the tax benefit provided under Section 80D:
- You can deduct up to Rs. 25,000 per year for health insurance premiums for yourself, your spouse, and your dependent children. If you or your spouse are a senior citizen (60 years or older), the maximum deduction is Rs. 50,000 per year.
For example, Rohit is 30 years old and pays Rs 20,000 for his health insurance policy and Rs 10,000 for his spouse’s health insurance premium. Furthermore, he pays a Rs 35,000 premium for his father’s medical insurance policy, who is 55 years old. In this situation, Rohit’s maximum 80d deduction is:
| Category | Maximum allowed limit (in INR) | Maximum allowed limit (in INR) |
| Premium paid for self and spouse | 20,000+10,000 = 30,000 | 25,000 |
| Premium paid for his father | 35,000 | 25,000 |
| Total amount | 65,000 | 50,000 |
As you can see from the table, Rohit paid Rs. 65,000 towards insurance premiums, he can only avail a deduction of 50,000 because it is the permissible tax benefit. If we assume, his gross income is Rs 5,25,000 and the total 80d deduction he got was Rs.50,000. His taxable income would be Rs.4,75,000.
- For parents: You can deduct an additional Rs. 25,000 per year for your parent’s health insurance premiums. If one of your parents is a senior citizen, the maximum deduction is Rs. 50,000 per year.
For example, Vivek is 50 years old and pays a premium of Rs 22,000 for a health insurance policy. He also pays Rs 45,000 in premiums for his 70-year-old mother’s medical insurance coverage. Let us look at the tax benefit he can get under section 80D.
| Category | Actual Expense (in INR) | Maximum allowed limit (in INR) |
| Premium paid for self | 22,000 | 25,000 |
| Premium paid for his mother | 45,000 | 50,000 |
| Total amount | 67,000 | 75,000 |
From the table, one can understand that he can claim the whole amount of the insurance premium which is 67,000 as an 80d deduction as it is within the limit of 75,000. If we assume, his gross income is Rs 7,00,000 and the total 80d deduction he got was Rs.67,000. His taxable income would be Rs.6,33,000.
Making the most of your tax savings
To maximize your tax savings from health insurance, consider the following:
Choose a comprehensive plan: Choose a health insurance plan that covers your entire family’s healthcare needs. To receive tax benefits, ensure that the premium amount falls below the limits specified in Section 80D.
Include seniors in the plan: If you have senior citizen parents, having them in your health insurance plan may allow you to claim an extra 80d deduction.
Timely payment of premiums: To take advantage of the tax benefits, you must pay your health insurance premiums on time. Late payments may result in the loss of tax deductions.
Maintaining records: Keeping track of all your health insurance premiums and payments is essential. These documents will be required when you file your tax returns.
Note: It’s vital to remember that in order to claim this deduction, the premium must be paid from your taxable income. The discount applies whether the coverage is purchased for yourself, your spouse, children, or parents.
At last,
Health insurance is more than simply a financial product; it’s an essential tool for protecting your health and financial stability. With medical prices increasing and healthcare getting more complex, having the proper health insurance policy can provide you the peace of mind you and your family require. Health insurance is essential for protecting you and your family, whether it covers unexpected medical bills, ensures access to quality healthcare, or provides tax benefits.
