I remember a friend of mine frantically making last-minute investments to save on tax. Though the coming three months are enough to adopt appropriate tax planning methods, it is also necessary to know about the available financial instruments that can help reduce your outflow on tax this year.
Apart from tax-saving monetary instruments like equity-linked saving schemes (ELSS) or time-tested investment options like Public Provident Fund (PPF), there are times when people end up buying those insurance policies which they may not need. Every insurance plan differs from the other in tenure and purpose. However, proposals of the Union Budget 2018 have made an investment in health insurance plans as a viable option to save on tax. One may consider buying a family or individual health insurance.
Other than tax advantages, one can browse insurance aggregators’ portals like that of Paybima to have a better understanding of myriad benefits offered by insurance companies in India.
Quick Tips to Save tax through Health Insurance
Buying Health Insurance Plan to Seek Tax Rebates
While a health insurance cover offsets hospitalization charges in the long run, it also helps save on tax. Under Section 80D of the Income Tax Act, premiums paid on health insurance taken for self, spouse and children allow deduction not exceeding Rs.25000. In addition, health insurance taken for parents, aged above 60 years, attract greater relief. As per the provisions of the Union Budget 2018, paying premiums of health insurance taken for parents (senior citizens) attracts an increased tax rebate from Rs. 30,000 to Rs. 50,000. This means that paying for health insurance premium for self and aged parents (senior citizens) can reduce tax liability from Rs. 55,000-Rs. 75,000 during any financial year.
Which Health Insurance Plan Should You Buy?
In addition to saving tax annually, an essential element of tax planning, having insurance also shields you from having to pay exorbitant health care costs. You may choose among the various kinds of plans offered by insurance companies depending on your need of coverage and budget. While paying for a health insurance cover, it is necessary to understand if a plan covering an individual would suffice your needs or if you would like to opt for a family health insurance cover.
If you are looking to buy health insurance only for yourself, it would seem reasonable if you opt for an individual cover. However, this means that you may have to buy separate policies for your family members to avail them the benefits of health coverage. This is different from having a family floater policy that allows all family members to be covered in a single policy. Having a family plan reduces your income tax liability to the extent of the amount paid as coverage availed by family members. Section 80D of the Income Tax Act also allows tax benefits to those belonging to Hindu Undivided Family (HUF). However, the tax benefits are based on the amount of premium charged from the member subject to the limits under this Act.
It must be remembered that cash payment for health insurance attracts no tax benefits. One needs to pay the premiums of the health insurance plans bought through banking modes including cheque, demand draft, payment through debit or credit cards or using the net banking system. One can, however, save on tax payment by providing details of the amount expended on preventive health checkups for which payment may have been made in cash.