If you have a health insurance policy, you can earn benefits on premiums paid on health check-ups, says Sajja Praveen Chowdary, head-Term Life Insurance, Policybazaar.com.
The last two years have highlighted the importance of both well-being, and health insurance in one's life.
A strong immunity and healthy lifestyle keeps us guarded against infections and virus attacks that for now seem to keep striking one after the other. Similarly, insurance coverage guarantees protection for you and your family in case of any unanticipated medical expenses.
As you enter 2022 with excitement, you must also review your existing health and term policies, understand their renewal timings, coverage details, and most importantly, avail tax benefits.
How can you claim tax for a health policy?
Understanding the Income Tax Acts
Before you save on your goal, it is essential to have adequate health insurance cover for self and family.
The primary cause for this is having financial security against whopping bills and medicines. But, the other significant reason is that the premium paid towards health insurance policies also provides a tax benefit under section 80D of the Income Tax Act.
Hence, having health insurance coverage for oneself, kids, or parents will lower the taxable income and the tax liability.
Moreover, anyone can avail of this deduction irrespective of whether your parents or children are dependent on you or not.
Similarly, if you have bought term insurance, which is the most straightforward form of life coverage and provides financial protection at the most affordable rates for a certain period to your family will also provide tax benefits under Section 80 C and 10(10D) of the Income Tax Act 1961 (the Act).
In fact, under Section 10(10D), the death benefit of the term insurance policy is exempted from income tax but only if the sum assured is at least ten times of the annual premium paid.
You can also take the term insurance benefits under Section 80D, but indirectly.
If you had selected an additional medical cover, such as Critical Illness or Surgical Care cover, you could avail benefits in both term insurance premiums and health insurance cover, leading to an overall saving on taxation.
Know the tax benefits
In the case of health insurance coverage, the maximum deduction limit of the tax benefit depends on the insured age.
For instance, if the insured person is under 60 years, the highest tax deduction they can avail will be Rs 25,000 per year. Alternatively, if the insured is over 60 years, the deduction limit is Rs 50,000.
Another case can be that both you and your parents are above the age of 60 years, in such a time, you will be able to avail of a maximum tax concession of Rs 100,000.
In term insurance, you can claim the rebate on the premiums paid for up to Rs 150,000 annually.
However, only individuals and Hindu Undivided Family (HUFs) are eligible to claim deduction on the premiums paid for a term insurance policy.
If you have a health insurance policy, you can earn benefits on premiums paid on health check-ups.
So if you are paying a premium of Rs 25,000 and health check-up of Rs 10,000, then you'll be eligible for a tax deduction of up to Rs 35,000.
Situations when the beneficiary might still have to pay tax
Although anyone is eligible to get a tax rebate, there still might be one reason when the policyholder may end up paying tax. That is when they opt not to have the benefit paid out immediately.
In such a circumstance, the insurance company withholds the amount until paid out.
They only disburse it after a period of interest accumulation which is also liable for taxation.
To recapitulate, money-saving is a crucial aspect of life for every individual, and saving taxes and reducing tax liability is a certified way of doing so.
So, always consider your purchased health and term insurance plan as a bulletproof jacket that saves your hard-earned money through tax and also protects you when the unexpected monetary burden hits you hard.
Besides, with rising medical costs, this policy is definitely a valuable gift for you and your loved one.
So, search online and compare the two coverages of various companies and make the right pick to avail the tax benefits.