As health insurance premiums continue to increase, individuals with policies should consider utilising tax deductions provided by Section 80D of the Income Tax Act. This particular provision, exclusive to the Old Tax Regime, enables policyholders to deduct premiums paid for health insurance policies, resulting in a decrease in taxable income and overall tax responsibility.
The tax relief available through Section 80D serves as a valuable incentive for individuals and families to obtain health insurance coverage while simultaneously reducing their tax liability. By taking advantage of deductions under Section 80D, you can secure health insurance protection for yourself and your loved ones, while also lowering your taxable income and potentially saving on taxes.
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Deducting health insurance premiums typically entails including these payments on your tax return. Health insurance not only offers a safety net against medical expenses, but also allows for a tax deduction ranging from Rs 25,000 to Rs 1,00,000 under Section 80D.
Business Today spoke to Subramanyam Brahmajosyula, Chief Product & Marketing Officer, SBI General Insurance, who shed light on how does health insurance contribute to tax savings.
> Why is the year-end considered a crucial time for purchasing or renewing health insurance policies?
Choosing an appropriate timeframe to renew your health insurance is crucial in ensuring that you gain maximum Income Tax benefit. Year-end is when most people choose to purchase or renew health insurance policies because it provides an opportunity for people to assess evolving healthcare needs, opt for necessary add-ons, and secure uninterrupted benefits. This period often brings increased awareness about the importance of health insurance, prompting timely review and decision-making for better financial and health security.
> What is Section 80D of the Income Tax Act and how does health insurance contribute to tax savings under this section?
Section 80D is quite a beneficial tax-saving vehicle under the Income Tax Act which allows taxpayers to claim tax deductions of up to 25,000 on premiums paid for health insurance policies. This deduction can go up to Rs. 50,000 if family members or parents are senior citizens. In addition to policy premiums, the section also covers preventive health check-up expenses within the overall limit as mentioned aboveThis provision was introduced in 2013 to encourage proactive health management. Taxpayers can claim a deduction of up to Rs. 5,000 annually for such check-ups for themselves, their spouse, children, or parents.
> Could you explain how health insurance premiums for family members, including parents, can maximise tax benefits?
When it comes to maximising tax benefits, health insurance premiums for family members can be a great way to do so, especially if you are claiming a deduction under Section 80D. For policies that cover self, spouse, and children, a deduction of up to Rs 25,000 annually, or Rs 50,000 if the insured is a senior citizen, can be claimed.
If you are purchasing health insurance for parents below 60, premiums paid are eligible for a deduction of up to Rs 25,000, and if the parents are senior citizens, the deduction increases to Rs 50,000. In cases where both the policyholder and parents are senior citizens, the total deduction can go up to Rs 1,00,000. It may also be noted that these deductions are over and above the deduction of up to Rs. 1.5 lakhs which can be claimed under Section 80C. This structure allows individuals to get comprehensive health coverage for their families while also benefiting from tax savings.