How to Maximise Your Tax Savings on Health Insurance

In India, not many know about the tax benefits associated with a health insurance policy. Read on to know about the tax deductions you can avail under different sections of the IT Act and reduce your tax outgo.

In the purview of the rising cost of medical treatment, health insurance is a must-have for all. Buying a health insurance policy is the most definitive way to get protection against medical emergencies. Apart from providing you the financial cushion to meet the treatment cost, a medical insurance policy is also an efficient tax-saving investment. The premium you pay for the medical plan is eligible for tax benefit under different sections of the Indian Income Tax Act, 1961.

If you are looking to reduce your tax liability, you must be aware of the different tax benefits associated with a health insurance policy. Let us look at the various deductions available with medical insurance.

  • Tax benefit under Section 80D

If you are regularly paying the premium towards the medical insurance that covers you, your spouse, and children, you can get tax benefits up to Rs. 25,000 in a financial year under Section 80D of the Income Tax Act. If you or your spouse is aged over 60, the deduction limit increases up to Rs. 50,000.

Additionally, you can get tax benefit up to Rs. 5,000 on the expenses incurred on the preventive healthcare check-up during the policy term.

It is important to note that the tax benefit is available only if the premium is paid only through the accepted mode of payment like demand draft, cheque, credit card, debit card, or net banking. You cannot claim tax benefits for the premium paid in cash. However, you can claim a tax deduction on the expenses incurred for the health check-up you paid in cash.

  • Tax benefit under Section 80DB

A critical health insurance policy is vital to meet the expenses of the treatment of critical illness, which can run into several lakhs. Besides, a critical illness cover helps you get tax benefits up to Rs. 40,000 (for people aged below 60 years), and Rs. 60,000 (for senior citizens). The limit is extended to Rs. 80, 000 for very senior citizens (people who are aged 80 or more).

The tax benefits on critical illness cover are available only for specific types of illnesses covered under Rule 11DD, and you must attach a doctor certificate while filing the income tax returns.

  • Tax benefit under Section 80DD

If you are taking care of your family member’s treatment expenses, including spouse, children, parents, and siblings who are differently-abled, you can get a tax benefit up to Rs. 75,000 in a year. If the person has a severe disability, as a caretaker, you can get a tax benefit up to Rs. 1.25 lakhs on the expenses incurred for medical treatment, nursing, and rehabilitation.

  • Tax benefits under Section 17

This tax benefit on health insurance is available only for employed professionals, but not many are aware of it. Section 17 guarantees tax benefit up to Rs. 15,000 in a year if the employer pays for the medical expenses from your salary under the medical allowance. You can avail of this tax benefit for expenses on the treatment of yourself or any of your family members, including spouse, dependent children, siblings, and dependent parents.

 Final Word

Thus, you can avail tax benefits on health insurance under different sections of the IT Act. Be aware of the various sections and utilise it to get maximum savings on your tax payments.

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