When you are looking to plan your finances in a way that benefits you and saves money, you will notice that health insurance is one of the best avenues. Health insurance is an investment that will give you long-term benefits and help you save money in your tax bracket. The decision to buy health insurance should be carefully considered as there is more than one way it can help you save money. Here are some ways you should consider saving tax with health insurance.
Save Tax Under Section 80DDB – If you have contributed towards the treatment of a family member (spouse, children, sibling, or parents) as they suffer from a specific illness, you are allowed to claim it as a tax deduction. All you need to do is get a certificate from a specialist. If the treatment of the dependent is being undertaken in a private hospital, you need not go to a public hospital for the certificate. The specialist signing on the certificate must be working in that hospital full-time and have a postgraduate degree in General Medicine or an equal degree as recognised by the Medical Council of India. You can be eligible for tax deductions of 40,000 rupees to 1,00,000 rupees or the actual amount paid, whichever is lower, based on the age of the dependent.
According to the Income Tax Department, these illnesses can be considered when filing for tax exemptions under section 80DDB.
- Neurological disorders where the disability level is certified to be above 40% – Dementia, Dystonia Musculorum Deformans, Aphasia, Motor Neuron Disease, Ataxia, Chorea, Hemiballismus, Parkinson’s disease.
- Malignant Cancer
- Acquired Immuno-Deficiency Syndrome
- Chronic Renal Failure
- Haematological disorders – Hemophilia, Thalassaemia
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Save Tax Under Section 80DD – Under section 80DD, the taxpayer can be exempted between 75,000 rupees to 1,25,000 rupees. It refers to the amount paid towards the treatment or LIC policy of a family member (spouse, children, parents, and siblings) who is entirely dependent on the taxpayer for support and maintenance. It is applicable in case the disability of the person is not less than 40%. Any amount paid towards the treatment or care of the dependent individual is also exempted. If the disability is more than 40% but less than 80%, then the amount eligible for the exemption is 75,000 rupees. If the disability is more than 80%, the amount is 1,25,000 rupees.
Save Tax Under Section 80D – Under section 80D, you can get exemptions in tax if you have paid medical insurance premiums for yourself, your spouse, dependent children, or your parents. This is a great opportunity to buy health insurance for parents and cover them. The tax deductions, in this case, largely depend on the age of you and your spouse, and your parents. Here is the table explaining the exemption limits for each scenario.
|Covered Individuals||Premium Paid (rupees)||Tax Exemption (rupees)|
|For self, spouse, and children||For parents|
|If family and parents < 60 years||25,000||25,000||50,000|
|Family<60 years but parents>60 years||25,000||50,000||75,000|
|Both family and parents>60 years||50,000||50,000||1,00,000|
|Members of HUF and non-Resident Individual||25,000||25,000||25,000|
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Premiums paid towards any other member of the family including siblings are not eligible for tax savings.
Save Tax Under Section 80 U – Under section 80DD, the taxpayer themselves cannot get an exemption in case of disability. The provision for that is given under 80U. If you buy health insurance for yourself and you are eligible for tax exemption under section 80 U, you can be exempted up to an amount from 75,00 to 1,25,000 rupees. If you are claiming exemption under section 80 U, you cannot claim exemptions under 80 DD. For the sake of clarity, disability has been defined as –
- Low vision
- Hearing impairment
- Mental retardation
- Mental illness
- Loco Motor disability
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When calculating tax, there is also a condition called severe disability, which refers to a condition where the disability is 80 per cent or more. This category includes multiple disabilities, autism, and cerebral palsy.
Save Tax on Medical Reimbursement Under Section 17 – If you are looking to save money on tax levied on medical reimbursement, then look under section 17. Employers often grant medical reimbursements to employees. It means the employees have to pay the amount themselves, produce the bills and submit them to the company on time to gain a tax exemption of up to 15,000 rupees. The same is not seen in medical allowance, as medical allowance is fully taxable. It is the amount given by the company to the employee to be spent at a later date. The amount is exempted if it is spent on self or family members for treatment.
The money saved on health insurance and through health benefits can be reinvested and at the same time, the benefits reaped from medical care are priceless. With healthcare getting more expensive and exclusive, these are some ways to save tax with health insurance in India.