How much tax you can save via health insurance
- Health insurance premium payments should be made in any mode other than cash, otherwise the same shall not qualify for the deduction
Where health insurance is a necessity, it can also help save your tax. Section 80D of the income tax act allows an individual to claim a deduction in the income in respect of insurance premium payments made during the year to secure the health of self and family members.
The deduction under section 80D is available irrespective of whether one’s parents are financially dependent.
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However, one can only claim a deduction for parents and not for parents-in-law. In that case, if your spouse is also working, she can also save tax by buying health insurance for her parents and claim a deduction for up to ₹50,000. This way, you can maximize tax savings deduction benefit on your entire family income.
"Irrespective of paying a premium for either your single parent or both parents, as per the provisions of Income-tax Act, you would be able to claim a deduction of the total amount of premium paid subject to a maximum of ₹25,000. This limit can further increase to ₹50,000 in case your parents are senior citizen (that is, equal to or more than 60 years of age)," said Vishwajeet Parashar, Chief Marketing Officer, Bajaj Capital.
Here’s how you can avail of maximum deduction benefit while paying a premium for your health insurance policy.
> ₹25,000 for premium payments made to cover self, spouse and dependent children.
> An additional ₹25,000 for premium payments made to cover dependent parents aged less than 60 years; or
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> An additional ₹50,000: for premium payments made to cover dependent parents aged 60 years or above (Senior Citizen);
Health insurance premium payments should be made in any mode other than cash, otherwise the same shall not qualify for the deduction.
Sudhakar Sethuraman, Partner, Deloitte India said the quantum of tax savings on account of the above deduction is dependent on the effective rate applicable to the individual. “Assuming an individual has an effective tax rate of 31.2%, then the tax savings will be approximately ₹23,400 {[ ₹25,000 (self and spouse) + ₹50,000 (Parents)]*31.2%}.
However, it is pertinent to note that health insurance shouldn't be bought only for the tax-saving purpose, it should ideally be bought to reduce your financial stress in case of medical emergencies.
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