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The rising expense of healthcare facilities has made it critical to get health insurance for yourself and your family. Aside from providing financial security in the event of a medical emergency, a health insurance policy can help you save money on taxes. Yes, you read that correctly. Health insurance coverage can help you save a lot of money under different sections of the tax code, including the 80D Income Tax Act and others. Get all of this information and updates. Tax HelpDesk provides income tax consultation. It provides one of the greatest GST and income tax services. Keep reading the blog to learn more.
Tax Savings Related to Health Insurance
Section 80D of the Income Tax Act and Section 80DDB (Treatment of Critical Illnesses) of the Social Security Act can reduce your tax liability by lowering your taxable income. For example, the health insurance premiums you pay for yourself and/or other family members are deducted from your taxable income. It will not be subtracted from the total amount of tax that you will have to pay. Furthermore, the amount of tax benefits provided by Section 80D is dependent on the age of the covered.
You can deduct the cost of your health insurance premiums as well as the costs of preventative health care for yourself, your spouse, your dependent children, and your parents. This is in accordance with the terms and conditions outlined in Section 80D of the Income Tax Act of 1961.
Understanding Section 80D for Health Insurance
The premium you pay for health insurance coverage or medical expenses under Section 80D of the Income Tax Act is exempt from your income tax liability for a specific fiscal year. This exemption is available on both individual plans and family floater plans that include you, your spouse, your children, and your parents. You can also deduct expenses for preventive health checkups under 80D during the policy term to reduce your income tax liability. There are three methods for filing a tax return:
- Claim a Rs 25,000 deduction under Section 80D for health insurance for yourself, your spouse, and any dependent children. If your dependent parents are under the age of 60, you can claim an additional deduction for their insurance up to Rs 25,000. As a result, the total deduction is Rs 50,000.
- The deduction amount is Rs 50,000 if the parents are over the age of 60. You can claim a total deduction of Rs 75,000, which includes Rs 25,000 for premiums paid for yourself, your spouse, and dependent children, and Rs 50,000 for premiums paid for your parents.
- If you and your parents are both senior citizens, the highest deduction you can claim is Rs 1,00,000 (Rs 50,000+Rs 50,000).
Examine the following example about tax deduction under Section 80 D:
Rahul lives with his wife, daughter, and parents who are dependent on him. He decides to take up two health insurance plans on the recommendation of his Chartered Accountant. Rahul, his wife, and their daughter are all covered by the same policy. The other policy exclusively covers his parents. You can think about numerous scenarios to figure out how to save tax under Section 80 D.
- Rahul’s family members are all under the age of 60, which indicates that none of them are elderly citizens.
- Rahul will receive a total income tax deduction of Rs 40,000 in this situation. He will receive a Rs 20,000 deduction for each policy.
- Rahul’s parents are in their golden years.
As in the previous situation, Rahul will be eligible for a Rs 20,000 deduction on the first policy in this scenario. Because his parents are seniors, he will be eligible for a Rs 30,000 deduction on the second one. As a result, his total tax deduction will be Rs 50,000.
Final Words
Get all of this information and updates in one place. Tax HelpDesk provides income tax consultation. It offers one of the most comprehensive GST and income tax services.
