Health Insurance Plans

pays for your hospital bills for diagnostics, surgery etc.

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How to save tax with health insurance?

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With advancement in medical science and technology, healthcare facilities have become more sophisticated. At the same time, it has become more expensive. Considering the increasing cost of healthcare, buying Health Insurance is not an option but a necessity. There were times when people used to keep a chunk of their savings reserved for healthcare, and that approach was actually meaningful and still applicable despite introduction of various insurance products. You never know when you require funds to meet your requirements aroused out of any unforeseen medical emergency. On the other hand, the cost of living is also increasing in a phenomenal way – every second we get to see stories about the impact of rising Inflation on common man’s life.

The rise in cost of living is resulting in decreasing rate of saving and sometimes one has to compensate monthly expenditure bills from savings. Thus, your savings may not be sufficient to take care of your and your family’s healthcare needs. Health plans have come like a panacea in this case. You can simply pay a small Premium towards a health Policy in a year to avail benefits in form of mediclaims.

Health insurance plan: the dual benefit

Health insurance plans provide you tax benefits and thus you can save tax on buying health policy. It is a well-known fact that an individual tax payer can save taxes of up to Rs one lakh under section 80C of the Income Tax Act 1961. This section is applicable for certain types of insurance products including traditional and unit linked insurance plans. However, for tax saving through health insurance, you need to refer to the section 80D of the act.

The section provides tax deduction for payment of up to Rs 15,000 towards health insurance premium for himself, spouse and dependent children. In addition, an individual can also Claim Tax Benefit for paying health insurance premium of Rs 15,000 for his or her parents. This limit is increased to Rs 20,000 in case of parents being senior citizens, above 65 years. In this manner, an individual tax payer can avail tax benefits of up to Rs 35,000 in a year.

For instance, Mr. A has a health insurance policy for him as well as for his family i.e., spouse and his children. His premium amount annually comes to Rs 20,000, however the amount for deduction that can be claimed by an individual is Rs 15,000. Therefore, Mr. A would be allowed to claim deduction of Rs 15,000 towards the payment of health insurance premium. And, if his annual health insurance premium is Rs 12,000 he would be allowed to claim deduction of Rs 12,000.

Similarly, if Mr. A has one more health plan for his parents who are 65 or above 65 years of age and total annual premium for this health policy comes to Rs 18,000, he would be allowed to claim for deduction of Rs 18,000. And, if the annual premium amount is more than Rs 20,000 say Rs 25,000, then Mr. A would be allowed to claim for deduction of Rs 20,000 towards this health plan.

One important thing to be noted is that the health insurance premium should not be paid in cash if an individual wants to avail tax benefits. Payment can be made through cheque or net-banking.

To buy health insuranceis always a good choice to save tax. The above provisions, if considered in tax plan will not only save tax but would also provide all the preferred benefits attached to your health insurance plan in times of health crisis when you need your money the most.