Taxes and investments are some of the basic economically recurrent activities of an earning individual’s life in India. The government stands on the economy raised largely from taxes paid by the citizens, hence it is an essential part of the financial ecosystem of the country.
However, there are certain provisions available under the Income Tax Act, 1961 that allows individuals to turn their insurance and investment plans into income tax saving schemes. Keep reading to look through the various tax saving investments available in India.
Although tax saving is mostly practiced consciously and availed under standard investment plans, health insurance plans as tax saving options have their own taxation rebates that make it an interesting insurance instrument for passive investors with low-risk appetites, but who would like to being their investment journey by availing the existing reductions as well.
A health insurance policy is an insurance instrument that covers medical costs incurred in the course of a prolonged hospitalization, and costs post discharge as well. It is a general policy that has many variations offered by insurance providers according to age groups and family structure. One may choose from an individual health plan, a family plan, senior citizen coverage and even critical illness insurance plans.
They are important tax saving options because of their simple premise, which is to protect the policyholder and their dependents from any further emotional or financial distress at a time that they may already be vulnerable due to illness or injury. At times of great inflation in medical and hospitalization costs, the selection of a health insurance policy is a necessity for every individual, but with the added benefit of it being one of many tax saving investments the insurance morphs into an investment as well.
One of the foremost benefits of a health insurance plan apart from far-reaching perks that can help cover the costs of a person’s medical liabilities an expenses is the tax reduction a person is eligible to avail along with their Tds on salary over their paid premiums and coverage amounts. Let us read through some features that make it an optimum addition to tax saving investments:
1. Tax Saving Insurance:
The premiums paid for a term insurance plan and the payout sum thus received from the same at the time of maturity is exempted from taxation under Section 80C and 10(10D) of the Income Tax Act, 1961.
For health insurance plans, the premiums paid are deductible from the net taxable income earned by the policyholder as per Section 80D of the Income Tax Act, 1961.
One can avail tax deductions up to Rs. 25,000 per year on insurance premium payments. For senior citizens this amount increases to Rs 50,000 for taxpayers over the age of 60, with an additional Rs 5,000 for costs incurred medical tests and check-ups for dependents such as spouses and children.
Preventive Health Check-ups done by taxpayers during a policy term are eligible for tax reductions for Rs 25,000 (below 60 years of age), and Rs 30,000 for senior citizens under Section 80D of the Income Tax Act, 1961.
In the event the taxpayer is maintaining the health insurance premiums for their parents, they can avail a tax deduction of up to Rs 50,000 per year. This deduction under Section 80D of the Income Tax helps one avail reductions for their parents if they are above the age of 60.
For senior citizens above the age of 80, a taxpayer can avail a tax deduction of Rs 35,000 to cover the medical expenses incurred in the course of the year such as tests and preventive check-ups.
For Critical Illnesses, one can avail a tax deduction of up to Rs 80,000 under Section 80DDB, as long as the aforementioned illness is mentioned under tax-exempted illnesses in Rule 11DD.
2. Coverage: Apart from being integral tax saving investments, health Insurance policies offer complete end-to-end coverage against hospitalization costs, ambulance fees, including pre and post-op care. According to the necessities of the policyholder, they can avail a sum assured in the event that their income become irregular in the event that the policyholder meets with an accident.
3. Renewability: A policyholder can renew their health insurance which can last well into and beyond retirement because that is when one is more prone to illnesses and ailments. One can keep their policies updated and renewed so as to avoid any distress caused by sudden illness or accidents, and also maintain them as important tax saving options at an older age.
Before purchasing a health insurance plan one should consider the following things:
- Coverage: The payments or reimbursements a policyholder may receive from insurance providers has to be adequate enough to cover high-cost treatments and even post-care for the policyholder. Hence one should go for plans that have a minimum 10 lac sum assured since medical costs have inflation margins that increase exponentially.
- Claim Process: Before investing in an insurance policy, one should independently look at the credentials of various insurance providers about their track records, claim payment promptness.
- Hospital Partners: At the time of zeroing in on a health insurance plan one should go for an insurance provider that has a strong list of reputed hospitals under their policy listing.
- Additional Medical Expenses: Select a policy which allows one to have extensive cover over not just hospitalisations, but also tests, doctor consultations and medicines.
Exclusions: Specific illnesses and surgery procedures may not be covered under a health insurance plan. Additionally, before purchasing a health insurance plan one should check the sub-limits the provider may have in terms of room costs, ICU charges at the time of hospitalisations.
Policyholders in the pursuit of choosing all-in-one policy that comes under tax saving investments and insures one’s health and well-being can be tedious process, For further assistance, you can reach out to financial advisors from insurance providers such Max Life Insurance who are adept at helping you identify the health insurance policy ideal for your requirements.