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How health insurance can help you with tax benefits?

Oct 30, 2019 | 9 months ago | Read Time: 2 minutes | By iKnowledge Team

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. Since, majority of the population falls in this tax bracket, people have come up with new ways to avoid being taxed and buying health insurance is one of them.

With the intention of encouraging the purchase of insurance among people, the Government has made some changes to the Income Tax Act. Since there are numerous policies that 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 the 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 installments regularly. To avail the maximum benefit amount, you can include the premiums of the policies of your spouse and dependent children. The 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 upto INR 30,000.
  • 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. The Section 80D allows deductions upto INR 25000 for premiums paid for the guardian’s insurance policy. The amount can be increased upto INR 30000 if your parents are above 60 years in age. 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 upto INR 1.5 lakhs. To know about Aegon Life’s life insurance products visit our home page.


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