Every year, hard-working individuals plan their finances carefully to maximise their tax savings. While there are several ways to cut down your gross taxable income, getting a policy from a top health insurance company in India is possibly the best option. If you aren’t sure about how you can save taxes with a health insurance plan, we’re here to help. Let’s take a look at how you can save on income tax when you purchase health insurance.
The premiums you pay towards the upkeep of a health insurance policy for yourself, your spouse, children and parents can be deducted from your taxable income. For individuals below 60, you can claim a maximum deduction of INR 25,000. For insured individuals above the age of 60, the maximum deduction increases to INR 50,000. We can understand the rules a little better with an example.
Let’s say you’re currently paying the premium for a health policy for yourself, your spouse and your two dependent children. The maximum deduction you can claim for all four policies is INR 25,000.
Now, let’s assume you’re also paying the premium for health policies for your parents, both of whom are above the age of 60. You can make an additional deduction of INR 50,000. So, in total, you can claim deductions of INR 75,000 against the policies.
It’s crucial to remember that these deductions are not applicable if you pay your premium amount in cash. Cheque, demand draft, internet banking and credit or debit card payments are eligible for deductions under Section 80C of the Income Tax Act.
Preventive Health Check-Ups
The maximum tax deductions also include the cost of preventive health check-ups. Depending on the policy you’ve purchased and the plan you’ve opted for, you can claim certain deductions for the cost of health check-ups. The maximum deduction available for this is INR 5,000. So, if you pay a premium of INR 18,000 and pay bills for preventive check-ups worth INR 6,000, you can claim a deduction of INR 24,000 against your policy. You can cover INR 5,000 of your check-ups under the deduction, but not the additional INR 1,000.
Unlike with premium payments, you can avail of this deduction under Section 80D of the Income Tax Act even if you pay in cash. You don’t have to worry about the mode of payment for preventive health check-ups.
Buying a health insurance policy is a prudent financial decision for multiple reasons. Firstly, it safeguards your finances in case of a medical emergency. Secondly, it allows you to plan your finances and save on taxes as well! As the new financial year is just starting, you can make a wise choice and purchase a health policy for yourself and your loved ones today. After all, it will definitely come in handy in the future.