The end of each financial year sends each of us into a tizzy. One of the important question that lingers on everyone’s lips is that ‘Have I invested in enough tax-saving instruments this year? As 31st March approaches, there is a mad rush to save more tax, be it through fixed deposits, pension funds, home loans or even a life insurance.
Health Insurance as Tax saving tool
The selection of a tax-saving instrument is governed majorly by two factors
(a) the amount of tax that it helps save and
(b) the returns that it promises
Based on these two factors alone, the Indian taxpayers have many options from which they can choose. Among them stands a relatively underrated tax-saving instrument i.e. health insurance.
Let us look at the returns that this instrument offers. When people buy health insurance, it is mainly to protect themselves from potentially sky-high medical bills in the event of hospitalization. Few look at a health plan as a tax-saving tool. This is possibly because the health plan does not build a corpus; it simply pays for your medical expenses, whether by dealing with the hospital directly (cashless plan) or by reimbursing you (reimbursement plan). It is advisable to compare health insurance policies, to understand which policy gives you the maximum cover.
Nevertheless, through the simple act of paying your medical bills, the best health insurance can save you lakhs of rupees.
Consider this scenario:
Ten years ago, Mr. Dasgupta purchased the best mediclaim policy of Rs. 2 lakhs for his entire family. Back then, medical costs were low and Rs. 2 lakhs seemed sufficient. However, today Rs. 2 lakhs is certianly inadequate for even an individual due to the high medical inflation and medical billing. Hospitalization costs are exorbitant these days, and a single hospital stay can leave a hole in your pocket. This was almost unthinkable a few years ago when the inflation and especially medical inflation wasn't so high. But in today's day and age, the cost of medicines, hospitalization, bills, etc. have left us stunned. But we can shift this burden by understanding which is the best health insurance policy.
A good health plan allows you to save those lakhs. It boosts savings, not directly by building a corpus fund. Its effect is indirect i.e. it enables you to keep your bank balance and other assets intact even during a medical emergency. By covering your medical bills, health insurance ensures that you do not have to break into your savings. Thus, it allows you to save and grow your other investments even during a medical crisis.
Save tax with health insurance premium
Let us now consider the extent of tax saving made possible by having a health insurance policy. Under Section 80D of the Income Tax Act, Indian taxpayers are eligible for considerable tax-saving possibilities as they buy a health insurance plan.
- Self, Spouse and Children: When all the individuals covered by a given health plan are below 60 years of age, the policyholder is eligible for a tax benefit of Rs. 15,000 or the total annual premium, whichever is lower.
- Dependent Parents: If the policyholder provides health insurance for his/her parents, an additional benefit of up to Rs. 15,000 is available. If one of the parents is above 60 years of age, the additional benefit increases to Rs. 20,000. Thus, the policyholder has an opportunity of saving tax to the tune of Rs.35,000 i.e. Rs.15,000 (for self, spouse and children) + Rs. 20,000 (for senior citizen parents).
- Preventive health check-ups: Expenses incurred on preventive health check-ups are also eligible for tax benefits up to a maximum of Rs. 5,000. But this amount must be included within the limits mentioned above.
As you can see, health insurance is a great tax-saving tool. Moreover, it secures your family’s access to adequate medical treatment. You need to Plan your Health Insurance effectively in order to get the best benefits! Simply visit MyInsuranceClub.com to compare health insurance policy and get guidance through our industry experts.