In today’s day and age, we all want to save as much as possible for contingencies and unforeseen expenses. The COVID 19 pandemic not only showed us the importance of staying healthy but also the urgency of building funds to tackle sudden medical expenses. With regards to the latter, having tax deductions can prove to be a huge boon. Now, if you are looking for helpful tax saving ideas, you have come to the right place. We will take a look at one important type of deduction you can claim each year.
Tax saving tips: Enjoy deductions on medical insurance premiums
Section 80D of the Income Tax Act, 1961, is a tax concession provided on the premium paid for a health insurance policy. This provision is designed to promote health awareness and encourage people to invest in health insurance. As per this section, the premium paid for health insurance qualifies as a tax deductible. The benefit can be claimed for the premium that a person pays for themselves, their dependent children, spouse, and parents.
What does Section 80D say?
Section 80D provides the following tax saving options:
If you have paid health insurance premiums for yourself, your spouse, and your child in a financial year, then you can claim up to Rs 25,000 as tax breaks. Plus, if you have paid an extra premium for your parents, you can claim an additional Rs 25,000 if your parents are under 60 years and up to Rs 50,000 if your parents are aged above 60 years.
If all members are above 60 years (self, spouse, etc.), you can enjoy deductions of up to Rs 1 lakh.
You can also avail of tax exemptions under Section 80DD and Section 80DDB for expenses that you incur for medical treatments, including nursing, training, and rehabilitation of disabled dependents.
You can also avail of an additional exemption of Rs 5,000 from annual health check–up costs.
Note: If the health insurance premium is paid in cash, you cannot enjoy tax benefits. The payment must be made via online transfer, cheques, debit or credit card, etc.
What other provisions provide tax benefits on insurance policies?
Section 80C of the Income Tax Act, 1961 also offers benefits that help with tax planning and saving.
Section 80C is a popular tax–saving tool that offers a maximum deduction of Rs 1.5 lakh for all listed investments combined. The instruments covered under this section include mutual funds like Equity Linked Saving Schemes (ELSS), Public Provident Fund (PPF), and payments like home loan repayment, tuition fees, and insurance premium. Thus, when you opt for health insurance or life insurance, you can avail of tax benefits under this section, as well.
Now that you are know more about how insurance policies can help you reduce your tax burden, you can use these income tax saving tips to better manage your taxable income.
Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.