How Medical Bills Can Help in Saving Taxes?
Rohit, 25, was in for a pleasant surprise one day. He had decided to get a health insurance policy for himself only the previous year after joining the office. Now, his accountant told him that he would get a further deduction on his health insurance premium payments. This came as a spate of good news for Rohit, reducing his tax liabilities considerably. You can also save taxes on your health insurance policies and medical costs. Know more by reading on.
What is Section 80D of Income Tax Act 1961?
The portion of your earnings that goes into purchasing medical insurance and keeping your health is critical to your financial planning and tax exemption. Anyone who purchases a mediclaim coverage to cover hospitalisation expenditures, health care, and medical tests is eligible for a tax exemption under section 80D.
Saving taxes on your medical costs
Did you know that your medical bills can help you save on taxes? Our daily lifestyles have succumbed within a vortex of unhealthy habits and stressful routines, leading to major disorders and declining states of health around the year. Yes, your employer may already be providing health insurance coverage but the sum assured will not be sufficient in many cases. Based on the 1961 Income Tax Act, investing in health insurance is imperative for getting tax deductions and other benefits. Hence, buying health insurance policies for yourself and your family may help you cover the financial costs of health and medical emergencies while giving you tax deductions as well.
Experts always recommend starting with health insurance in your financial portfolio. While you should start saving from an early stage, buying health insurance at a young age is also recommended. Do not excessively worry about the health insurance premiums that you pay annually and consider the tax deductions that you can get instead. This investment will also pay off immensely in terms of safeguarding you and your family from the financial impact of hospitalization and medical treatments.
What is the Maximum Tax Exemption under Section 80D?
The amount that you spend in purchasing your health insurance policy and your premium payments will help you get tax exemptions. Under this section, anybody purchasing a health insurance or mediclaim policy for covering treatment, testing and hospitalization costs will be eligible for tax deductions.
Here are some key points worth noting in this regard:
- You can get tax deductions up to Rs. 25,000 by purchasing your own health insurance plan.
- If you are buying for yourself and your senior parents, then you can get tax deductions up to Rs. 55,000 (Rs. 30,000 is the amount allocated for your parents in this regard).
- If your parents are lower than 60, they will not be regarded as senior citizens. Their exemption threshold will be Rs. 25,000 in this case.
- Precautionary or preventative tests or medical checkups for yourself and other members of the family (dependants) will get you exemptions up to Rs. 5,000.
- The maximum tax deduction limit is Rs. 60,000 for people buying health insurance policies.
- Regular medical expenditure under Section 10A will be eligible for tax exemptions up to Rs. 15,000.
- If health insurance is provided by your employer, then you can get savings up to Rs. 15,000 from the taxable salary.
- Employees can also get exemptions on their medical bills including checkup costs and consultation charges along with expenses of dependent family members.
- You have to provide original copies of bills to the HR of the company or follow the employer’s guidelines in this regard.
- For deductions on medical tests/checkups, you have to furnish original copies of laboratory/diagnostic reports.
- Treatments for dependents who are specially challenged will be deductible under Section 80DD. The exemption limit is Rs. 50,000- Rs. 1,00,000.
- The exemptions are Rs. 50,000 if you are paying medical costs for family members with disabilities.
- If the disability is higher than 80%, then you can get exemptions till Rs. 1 lakh per year from the taxable salary amount.
- You have to furnish original copies of medical documents.
- Medical treatments for those with specified ailments will be deductible under Section 80DDB.
- The limits are Rs. 40-80,000.
- If any family member has a disability exceeding the 40% threshold, then you can file your claim for getting deductions.
- Ailments in this bracket include cancer, AIDS, neurological disorders, thalassemia, kidney failures, etc.
- For those up to 60, the deduction limit is Rs. 40,000 while it is Rs. 60,000 for those between 61 and 80 years of age. For those who are 80 and higher, the limit is Rs. 80,000.
- You will have to provide copies of medical bills and prescriptions for filing claims. The healthcare unit may furnish Form 10-1 where you can claim medical expenditure by filling it up.
Why buying health insurance is mandatory
You should not just purchase health insurance to get tax deductions. Agreed, you will get handsome deductions on your premium payments and medical bills in several categories. However, you should buy health insurance to financially safeguard yourself and your parents in the event of hospitalization, treatments and medical emergencies. Medical emergencies seldom come with warnings. Your insurance plan will help you cover the costs of the same without depleting your savings. You should know more about these deductions and purchase your health insurance policy beforehand instead of buying any mediclaim policy randomly before filing in order to save taxes.
Is health insurance tax deductible?
Yes you can get deductions on your health insurance policies up to Rs. 25,000 if you are buying the health insurance plan for yourself. This covers the premium payments that you have made throughout the year.
Can you get health insurance tax deductions if you are buying for your parents?
If you are buying for your senior parents and yourself, then you can get a higher tax deduction. This amount goes up to Rs. 55,000. Here, Rs. 25,000 and Rs. 30,000 are the deduction thresholds for yourself and your parents respectively.
Which section offering tax deductions on health insurance policies?
You can get tax deductions on your health insurance policies under Section 80D. This is the parent section for availing of these deductions. There are some exemptions offered under Section 10A for specified medical categories.