If you want financial security for your medical treatments and emergencies, It is important to buy health insurance policy. Such insurance plans cushion you against rising healthcare costs in the country.
You will be happy to know that the premium you buy health insurance is eligible for tax deductions. Under Section 80D of the Income Tax Act of 1961, you can find several options for tax deductions. In this blog, we will explore these deductions and how to maximise your tax benefits under Section 80D.
What is Section 80D of the Income Tax Act?
Section 80D contains provisions for tax deductions for different kinds of people. The tax deductions for different categories of people are as follows:
● For Individuals Below the Age of 60
Individuals below the age of 60 are eligible for tax deductions of up to Rs. 25,000 per year on medical expenses such as health insurance premiums. It can include a person, his or her spouse, and their dependent children.
● For Individuals Aged 60 and Above
Individuals over the age of 60 are eligible for tax deductions of up to Rs. 50,000 on their medical insurance premiums. It is aimed at senior citizens such as old parents and grandparents.
● Maximum Limit
Under Section 80D, a family can claim a maximum tax deduction of up to Rs. 1 lakh. It means that collectively the deductions for individual members such as a spouse, dependent children, and parents or senior citizen parents, can hit a maximum limit of Rs. 1 lakh.
Please note that tax deduction under Section 80D is only available under the old tax regime.
How to Maximise Benefits Under Section 80D?
You can follow the following procedures to maximise benefits under Section 80D:
● Purchase Early
You must plan and calculate your insurance requirements in advance. The best way to ensure maximum deductions is to have insurance throughout the financial year. For this, you must apply early in a financial year.
● Family Coverage Optimisation
Every insurance policy has its pros and cons. To maximise deductions, you have to select the right combination of insurance plans. For example, if you want insurance plans for senior citizen parents, it is best to buy a separate insurance plan for them instead of including them in a floater. It will lead to an increase in the cumulative premium amount, leading to a rise in the deductions you are eligible for.
● Add-Ons
If your insurance premium does not exhaust the tax deduction limit, you can buy add-ons to expand the coverage and claim greater deductions under Section 80D of the Income Tax Act.
● Preventive Health Check-ups
Under Section 80D, you can also claim tax deductions for preventive health check-ups of up to Rs. 5000 within the existing limit. So if the insurance premium doesn’t exhaust the limit, you can maximise the benefits by opting for preventive health check-ups.
● Buy Coverage for Multiple Year
If your income tax rate is likely to increase, you will be better off buying a multi-year insurance plan. It will lock the premium that you are charged, thus protecting you from inflation, and do away with the hassle of renewing your insurance policy annually.
● Maintain All Documents
Several documents are required to be eligible for deductions under Section 80D. These include the insurance policy documents, receipts of the premium and preventive health check-ups. Organising all these documents will make it easy to apply for the deductions and ensure tax compliance.
Bottom Line
Overall, a family can enjoy several deductions under Section 80D. In total, you can claim deductions of up to Rs. 1 lakh. You must regularly review your insurance requirements and update the terms of coverage if there is a change in your requirements. To maximise the coverage, you can buy add-ons and opt for preventive health check-ups.
This post was published on November 14, 2024 6:14 pm