The cost of healthcare is at an all-time high, which makes it vital to invest in health insurance for your family. Also, healthcare issues do not come with any prior intimation. The uncertainty associated with medical issues makes them even graver. Irrespective of your age, health insurance is a must to protect you from rising medical costs. While most people are well aware of the need for robust health insurance to stay protected against medical emergencies, not many people see their health insurance as a tax-saving instrument. Besides covering your medical needs, your health insurance can offer you significant tax relief while filing your Income Tax Return (ITR).
Understanding health insurance premium
A health insurance policy premium is the money you pay to the insurance provider to cover you against medical and healthcare costs. You can keep your policy active for a lifetime by simply renewing it on time and paying premiums regularly. There is a wide range of health insurance plans available at different premium amounts covering different benefits. There are policy plans ranging from one to three years of tenure.
Income tax return and health insurance
As per Section 80D of the Income Tax Act, individuals can avail of a tax deduction on the health insurance premium amount that they paid for themselves, their spouse, children, and parents. If your annual income falls in a taxable slab, you can claim tax deductions when filing the income tax return on the premium that you paid for a health insurance plan.
Whether you are purchasing health insurance for yourself or your spouse, your children, or your parents, you can avail tax benefits on the same and save your hard-earned money while also securing the health of your loved ones.
How to claim tax deductions on health insurance premiums?
You can claim tax benefits on the payment of health insurance premiums when filing an income tax return. Here is how:
- When filing your income tax return, select the column of ‘Deductions’. To, avail tax deductions on health insurance premiums, select Section 80D.
- From the drop-down menu, select the option you are claiming a deduction for. The available options are –
- Self and family members (both self and family less than 60 years)
- Self and family members (where self is above 60)
- Self and parents
- Parents (above 60 years)
- Self, family, and parents (parents above 60)
- Self, family, and senior citizen parents (parents above 80)
- Self, family, and senior citizen parents (self above 60 and parents above 80)
- Next, attach supporting documents like ID proof, address proof, and insurance policy copy and likewise to get verified by the income tax department.
It is important to remember that tax deductions on health insurance premiums can be claimed when you make the payment through digital modes. Cash payments for premiums are not eligible for tax benefits.
When to claim tax deductions for health insurance premiums?
To claim tax deductions for premiums on health insurance, the premium has to be paid in the same financial that you file your Income Tax Returns. For instance, if you are paying a premium for the year 2022-23, tax deductions can be claimed for the same year only.
If you fulfill the above-mentioned criteria, you can claim deductions in tax when filing income tax returns. Ensure you file your income tax returns at least a few weeks before the last date to avoid the rush and last-minute hassles. Having adequate time to submit proofs and documents will help in claiming tax deductions easily and without error.
What documents you need to claim tax deductions?
When filing an income tax return, the only documents you require to file for a tax deduction are the receipt of payment of health insurance premiums along with a copy of your health insurance. The policy document must show the name and age of the family members insured along with their age. In case the premium has been paid for health insurance purchased for parents, you must obtain an 80D certificate from the insurer.
Points to remember when claiming a tax deduction
- Understand the tax exemption clause in your policy document.
- Do not pay health insurance premiums in cash.
- As per Section 80D, you can claim a maximum tax deduction of Rs 1 lakh
- Any member of the Hindu Undivided Family can claim a tax deduction for health insurance paid for a family member.
- The premium for health insurance should be paid via digital means if you want to avail of tax reduction.
- You can also claim for tax reduction for healthcare checkups and the payment for the same can be done in cash also.
- The limit for tax reduction can be availed for medical expenses and health checkups for senior citizens.
- When paying a health insurance premium for more than a year, is also eligible for tax reduction for all the said years.
Besides securing and safeguarding the health of your family, you can get tax benefits on premiums paid as per income tax laws. This offers the dual benefits of saving money. This makes the health insurance policy an excellent tax planning tool too and hence, a wise investment idea to consider for your future. Health insurance is vital and beneficial to avail easy tax benefits against the paid premium. Make sure you do not forget to claim the exemption when filing your income tax return and make the most of the benefit.