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How health insurance can help you with tax benefits?

Dec 11, 2019 | 7 months ago | Read Time: 3 minutes | By iKnowledge Team
How Health Insurance Can Help You with Tax Benefits

To increase your wealth, it is important that you spend wisely. Each penny you spend, should either cater to your needs, or give you suitable returns. We work hard every day so that we could sustain our families and save some capital for future investments. However, there is one factor which keeps bothering every earning professional in the world – Taxation.

The government has imposed taxes on many things that we own or use in our daily lives. In a year’s duration, we face numerous taxes like income tax, property tax, GST, road tax and many others. The money collected from these taxes is used for the growth and betterment of the country. As road tax, property tax, and GST, cannot be avoided or curbed, you may find a way to save a little of your hard-earned money in the income tax section.

Income tax is a very vast topic, but its basic concept revolves around the taxation imposed on the earnings of every individual in the country. According to the RBI guidelines and the Income Act, individuals who earn more than 2.5 lakh per annum are liable to pay income tax.

According to the new taxation system, individuals who choose to file their income tax as per the latest tax regime will have to forego nearly 70 out of 100 existing tax exemptions and deductions.

The following table demonstrates the difference in tax rates and income slabs between the old and new tax regimes.

Income Slab (in Rs.) Tax rates under the old regime Tax rates under the new regime
Up to Rs. 2,50,000 Nil Nil
Rs. 2,50,001 to Rs. 5,00,000 5% Nil
Rs. 5,00,001 to Rs. 7,50,000 20% 10%
Rs. 7,50,001 to Rs. 10,00,000 20% 15%
Rs. 10,00,001 to Rs. 12,50,000 30% 20%
Rs. 12,50,001 to Rs. 15,00,000 30% 25%
Rs. 15,00,000 and above 30% 30%

According to the new tax regime, taxpayers can now choose between either of the two tax regimes based on their income and investments. Taxpayers who opt for the new regime get to enjoy significantly lower tax rates. Click here to know more

Since numerous policies are being sold in the market, you need to know which ones offer the benefit of tax deduction. Health insurance is among the policies that offer handsome tax benefits, and here are the ways in which you can avail them:

  • Section 80D (Tax deduction based on Health Insurance Premiums Paid): This is one of the easiest ways to avail tax benefit from an insurance policy. Under Section 80D, an individual can claim a deduction of up to INR 25,000 for a fiscal year, if he or she pays the medical insurance premium instalments regularly. To avail the maximum benefit amount, you can include the premiums of the policies of your spouse and dependent children. Section 80D is a bit more lenient for senior citizens, so if your spouse is more than 60 years in age, the maximum deduction amount rises to INR 50,000.
  • Health care premium for parents: Though it is our moral responsibility to take care of our parents, paying for their insurance can help you avail tax benefits. Section 80D allows deductions up to INR 25000 for premiums paid for the guardian’s insurance policy. The amount can be increased up to INR 50000 if your parents are above 60 years in age. If both you and your parents are above the age of 60, the amount rises up to INR 100000. You can also get an additional increase of INR 5000 for your parents’ annual healthcare checkups.
  • Critical Illness insurance: People who own these types of insurance policies may have a bittersweet experience with deduction. The owners of critical illness insurance policies are not allowed to avail tax benefits on the premiums paid for the policy, but the sum assured gained is tax free.

You can also get tax deductions on Term plans under the section 80C. Term plans are time restricted insurance policies and offer cover only till a specific period. Since term plans are classified as financial instruments, they offer tax deductions under the section 80C and specified deductions up to INR 1.5 lakhs. To know about Aegon Life’s life insurance products, visit our home page.


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