A Health Insurance is a must-have in your portfolio. Here’s how you can save tax on Health Insurance premium.
With healthcare costs going up every passing year, it’s important that you have a Health Insurance plan in your financial portfolio. It keeps you shielded from unforeseen circumstances and offers you the additional advantage of saving tax.
The premiums paid toward a Health Insurance plan is eligible for deduction under Section 80D of the Income Tax Act. However, the quantum of tax benefit depends on the premium paid on the policy and the age of the individual who is medically insured. To make the most of it, you need to pick an appropriate cover.
How Much Tax Benefit Can You get?
The insured is allowed a deduction of up to Rs. 25,000 for self and family members including children, spouse and parents given the most senior member covered by the plan is below 60 years. The deduction amount goes up to Rs 30,000 if the parents are aged above 60 years. So, the taxpayer could maximize his tax benefits to Rs. 55,000 in this case. If the taxpayer himself is above the age of 60 years, paying a premium for parents, he could avail a deduction of up to Rs. 60,0000.
|Details||Maximum Tax Benefit U/s 80 (D)|
|If an individual aged below 60 years pays premium for parents who are aged below 60 years||Rs 50,000|
|If he is aged below 60 years and parents are aged above 60 years||Rs 55,000|
|If the insurer himself and his parents are aged above 60 years||Rs 60,000|
Premium paid towards covering an employed child who is aged above 18 years is not eligible for deduction. However, if a male child is unemployed until 25 years of age and a female child is unmarried until the age of 25 years, the premium paid is eligible for tax deduction. This apart, your potential to save tax is also dependent on the type of the health plan you are associated with. Let’s explore health plans that can maximize your tax saving.
Individual Health Insurance Plan versus Family Floater Health Policy
If you have a family floater policy to cover your family members and the premium amount happens to be lesser than the deduction ceiling, consider switching to an individual plan as it would help to distribute the tax benefits on individual capacity. For example, say the insurer is 30 years old with his wife aged 25 years and children under 10 years, the father aged 65 years and mother aged 61 years.
Now, if we assume the collective premium of the family members (two adults + one child) to be Rs 35,000 and premium for parents (above 60 years age) to be Rs 40,000. The total premium would be Rs. 75,000. With the deduction ceiling set at Rs 55,000, you would not be able to claim a deduction for the extra premium of Rs. 20,000. To maximize tax benefits, in this case, you must take individual insurance for self and each of the parents and a family floater for the mother and child.
Before you zero in on a product, it is important to compare the policy features and the estimated premium and understand the tax deduction eligibility. While an individual health policy for each member may turn out to be expensive compared to a family floater policy, a mix of both could give you the best of both worlds. However, do avoid taking a family floater policy for the senior citizens as they might fail to accumulate the no claim bonus due to frequent claims.
Taxes You Can Save On Health Insurance
|Premium eligible for tax deduction||Tax saved under various tax slab (In Rs)|
|Tax slab of 5%||Tax slab of 20%||Tax slab of 30%|
|Tax calculation includes the education cess@3 %|
Things To Keep In Mind
In order to claim tax deduction benefit, you must pay the premium through cheques, debit cards, online payments etc. Apart from regular health plans, you are also eligible to claim deduction benefits on premium paid for a critical illness cover, subject to the deduction ceiling as per Sec 80 (D). Group health insurance policies provided by companies are not eligible for tax deduction benefits offered under Sec 80 (D).
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