Health insurance, healthier tax benefitsWant to know about tax benefits on your health insurance? Read here to get gyan on tax.
24 Sep 2008
When the Finance
ministry released the list of items that made you an income tax assessee, it
wasn't as if the list comprised only bungalows or fancy cars; it had mundane items
such as cell phones, credit cards, two wheelers, and such like. The result? More
and more people under the tax net. You could almost see the Fin Min rubbing his
hands together in glee at the projected increase in tax loot.
So what do you do now?
There is no way of sidestepping tax. Therefore, embrace tax-saving instruments that will give you maximum benefit by reducing your tax burden.
One such tax-saving instrument is health insurance, where this budget (2008-09) has made tax benefits more inclusive.
Only, you need to get a little smarter to get the benefit.
Let's see how.
You are probably aware that the premium you pay on health insurance policy is tax deductible under Section 80 (D) of the Income Tax Act 1961.
Until budget '08 came around, there was a Rs. 15000 cap on health insurance deductibles for individuals. This cap included the premium paid on health insurance for the individual, his/her spouse, dependent children, AND the individual's parents. In effect, you could claim Rs. 15000 as deductible on health insurance under Section 80 (D).
Budget '08 has come up with a very good distinction that increases your tax exemption while giving better coverage for your family and parents. Here's the relevant revised section of the Income Tax Act, 1961:
While computing the total income of an assessee, being an individual there shall be a deduction of sum specified in sub-section (2), clause (a) and (b) of Section 80 (D).
Sub-section (2): Where the assessee is an individual the sum deducted from his/her taxable income shall be the aggregate of the following:
- The whole amount paid to effect or to keep in force an insurance on the health of the assessee or his family (here family means spouse and dependent children of the assessee) but not exceeding Rs. 15000.
- The whole amount paid to effect or to keep in force insurance on the health of parent or parents of the assessee but not exceeding Rs. 15000 in aggregate.
What all this means is you can now get spend a tax exempt Rs. 15000 towards your family's health PLUS another Rs. 15000 towards the health insurance of just your parents. Therefore, effectively, you are eligible for Rs. 30000 - double the deduction from previous years.
Here is another nugget of information that you probably weren't aware of: You can also deduct premium paid towards a critical illness rider on your life insurance policy under Section 80 (D).
Remember, deductions under Section 80 (D) are over and above the deductions under Section 80(C) of Rs. 1 lakh.
So, it is not just that you are providing adequate health cover for your family as well as your ageing parents; you are saving on tax paid too. Which, let's face it, is always a good thing, whatever the Income Tax department might have to say otherwise.