Pay Health Insurance Premiums through Tax Savings!
Posted: Jan 05, 2017
Income tax is the tax payable by a person on his/her income. The Income Tax Act allows for tax exemptions under its various sections; one such section is the section 80 D of the income tax actwhich allows for exemptions on income tax if the taxpayer has undertaken health insurance policy or mediclaim policy.
Such health insurance policy can be eligible for tax exemptions only if it is taken from The General Insurance Company under the Central Government of India or from any other insurer approved by Insurance Regulatory and Development Authority (IRDA).
Under this Act, income tax exemptions can be claimed for individual health insurance scheme as well as health insurance under Hindu Undivided Family (HUF) Scheme. The HUF can be resident as well as a nonresident, and the policy can be taken under the name of any member of the family. The deduction is available to the taxpayer, the spouse of the taxpayer, the dependent children of the taxpayer and the parents of the taxpayer.
The deductions are applicable on health insurance premiums as well as annual health checkups.
In order to qualify for deductions, the payments need to be done in any form of cashless transaction means. Cash-based transactions are not eligible for deductions.
Tax Exemption Limits
For the year 2016-17, the maximum exemption allowed on health insurance paid for self, spouse and dependent children is Rs. 25,000, which was earlier Rs.15, 000
If any one of the above is above sixty years of age, then the exemption limit is 30,000, which was 20,000 earlier.
Exemptions on health insurance premiums paid for parents is maximum Rs. 25,000 and if either of the parents are above sixty years of age then the maximum exemption is Rs. 30,000.
Deductions on Medical Checkups and Treatment
A maximum exemption of Rs. 5000 can be claimed on annual expenditures incurred on health checkups and treatment. In the case of super senior citizens a maximum of Rs 30,000 annual exemption can be claimed for expenditures incurred by a Super citizen but not for own health checkups or treatment.
For example, if the father is a Super citizen and uninsured and mother is a senior citizen, then the uninsured father can claim up to a maximum of Rs. 30,000 tax exemption against annual expenditures incurred on health checkups and treatment of the mother.
Cost Benefit Analysis
Suppose Ram works in an office and falls under the income tax bracket then he is liable to pay income tax. Now Ram is worried as to how to reduce his income tax burden. Also, Ram is married and has two dependent children and his parents are now old and are dependent on him. Ram is worried regarding the health of his family members and as to how to be able to meet the expenses should sudden health related problems arise.
Ram’s friend, who is a tax adviser, suggests Ram a way by which he can kill two birds with one stone. He advises Ram to take up health insurance policy for his family members which would also result in tax savings under Section 80 D of the Income Tax Act. He works out the problem for Ram and Ram finds out that the tax savings which he would be making after taking a health insurance policy would actually be mostly paying for his health insurance premiums as well!
Annual Tax Exemptions are available to Ram.
A. A maximum of Rs 25,000 against health insurance premiums of self, spouse and children.
B. A maximum of Rs 5000 for health checkup/treatment of self, spouse, children.
C. A maximum of Rs 25, 000 against insurance premiums for parents.
D. A maximum of Rs 5000 for health checkup/treatment of parents.
Note: A+B or C+D cannot be more than Rs.25, 000
Prateek is a seasoned independent writer. His explanatory and creative writing style helps understand the subject matter easily and offers tips, tricks and expert suggestions for Star Health Insurance polices..