Every financial year, taxpayers look
for legal ways to protect their savings and minimise tax liability. The
pressure to keep up with the costs of living, the skyrocketing property rates
or the ever-increasing healthcare costs in India, fuels the need to save on tax
even further.
Besides methods such as house rent
allowance, saving on home loans, Fixed Deposits and PPF accounts, investing
in health insurance is a
legitimate and rewarding method to save tax. It not only helps to manage
medical care costs but it is also a great tax-saving instrument.
Here’s why investing in
a health insurance is best for your wealth.
Deduction on Insurance Premium
As per the Income Tax Act, an
individual (resident, non-resident, Indian citizen, foreign citizen) can claim
tax deductions under section 80D for medical insurance purchased for self,
spouse, parents and children. The same can be claimed by HUF (resident or
non-resident Hindu Undivided Family) for insurance in the name of any family
member.
♣ On premium paid for self, spouse
and children
The present tax deduction, available
as per section 80D on premiums paid for
self, spouse and children, is Rs. 25,000 per annum. If you or your spouse’s age
is 60 years or above, then the limit is Rs. 30,000 per annum.
Medical insurance purchased and paid
by employers, on behalf of their employees, will not be tax deductible under
section 80D. If employees pay any part of the premium themselves and it is part
of their CTC, then it is tax deductible.
♣ On premium paid for parents/senior
citizens
Health insurance cover for senior citizens can
be a little expensive. This is largely because with old age, the risk of
several ailments and contracting diseases is high. As per the risk assessment
by companies, the higher the size of the risk, the higher the premium.
An individual can claim deduction of
Rs. 25,000 per annum if he/she has paid insurance premiums for their parents.
For parents aged 60 years or above, deduction of Rs. 30,000 is allowed.
Example: For a family of four with
no one over 60 years, an individual can get tax liability reduced by Rs.
1,00,000 per annum, if each member has a health insurance with an annual
premium of Rs. 25,000 or less. You can save additional Rs. 5000 if any of
the members is above 60 years old.
Deduction for Super Senior Citizens
Under section 80D, for medical
expenses incurred to treat uninsured super senior citizens (more than 80 years
old), deduction of Rs. 30,000 is permitted.
Deduction on Preventive Health Check-Ups
With growing awareness about health
and wellness, many people choose to undergo preventive health check-ups. The
charges paid for such medical tests (up to Rs. 5000) can be claimed while
filing returns.
For example: If in FY15-16, an
individual paid Rs. 20,000 as insurance premium and paid Rs. 5000 for a health
check-up (self, spouse, parents or children), then they can get a tax deduction
of Rs. 25,000 as allowed under section 80D instead of only the premium amount.
However, this Rs. 5000 is the total deduction allowed to a taxpayer and not for
each family member of the taxpayer.
In addition, tax deduction on
preventive health check-up benefits can’t exceed the per annum limit (Rs. 25,
000/Rs. 30,000) as discussed above and is not available to a HUF.
Deduction on Insurance Riders
Many companies offer life insurance
riders on policies. Disability rider, terminal illness rider, accidental death
rider and term rider are few of the many examples. Premium paid on medical
insurance riders is also eligible for deduction.
Things to Remember
Please note that tax benefit is only
available on non-cash payments. Therefore, we suggest you pay your medical
insurance premiums through credit/debit card, cheque or direct bank transfer to
take advantage of section 80D.
The primary purpose of any health
insurance should be the benefits associated with it, which will help you and
your family as and when the need arises. It is often advised to never base your
decision solely on the tax benefits of a medical cover. Look for a medical
insurance plan that not only protects you and your family’s health but also
your hard-earned wealth.
- See more at:
http://taxguru.in/income-tax/tax-benefits-health-insurance-invest-heath-save.html#sthash.WXeTN61f.dpuf
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