Savings taxes while insuring your parents’ health
Purchasing parents’ health insurance not only acts as a solid safeguard for their health and finances, but it also offers tax-saving opportunities that eventually optimise your income tax return at the end of the year.
As a responsible citizen, you can never forego your tax payment, however difficult it might prove to be. Hence it is prudent to find out methods of saving tax in order to better manage your overall portfolio.
One such prospective sector is investing in health insurance. Considering the skyrocketing costs of the health insurance sector, it has become essential to maintain befitting health insurance coverage, which acts as a protective shield against unprecedented medical contingencies. Moreover, if you include your parents as well within this coverage, you can further enhance your tax–saving opportunities.
Section 80D of the Income Tax Act deals with tax deduction claims through health insurance investments and optimises your income tax return. However, please understand that this deduction is available if you avail of the Old Tax Regime for filing your Income Tax Returns and not the new one.
Ways to invest in parents’ health insurance and claim for a deduction?
Some of the most effective methods to optimise your tax deduction claims through your and your parents’ health insurance are as follows:
– You can claim a maximum deduction of up to INR 25000 as an individual taxpayer for a self-health plan, along with your spouse and dependent children.
– In case your parents are over 60 years of age, you can claim a further additional deduction of up to INR 50000. However, if your parents are within 60 years, then this limit is up to INR 25000 only, but it is over and above your limit.
– In case you pay medical expenses for senior citizens, which can be themselves, spouses, parents or children, who are not covered by any health insurance coverage, you might become eligible to get such expenses covered under a special deduction scheme limit of up to INR 50000.
– Back in 2013-’14, the government passed a special deduction scheme for preventive health check-ups, encouraging people to take better care of their health and early discovery of the onset of any ailment. In this respect, you can claim a maximum deduction of up to INR 5000 under section 80D. This particular deduction limit must never exceed the overall capping of INR 25000 or INR 50000 as per applicability.
So, you can claim this deduction on behalf of your children, parents, or spouse, apart from yourself. In this context, cash is accepted as an acceptable mode of payment for claiming the deduction, unlike health insurance premium payment claims.
Section 80DD deductions for maintenance and medical treatment for disabled people
The expenses incurred for the nursing and medical treatment, rehabilitation, physiotherapy, and training of dependent parents, who is a differently-abled individual, or deposited or paid under a special scheme that has been specifically crafted by the Life Insurance Corporation of India or any other competent insurer or the specific company or administrator, qualifies for this special deduction.
Quantum of deduction:
The standard quantum of deduction stands at INR 75000. However, if the concerned person’s disability is either over 80%, then this deduction limit rises to INR 125000.
Conditions and eligibility:
In order to claim this deduction, you need to fulfil certain specific criteria:
– For claiming this particular deduction, the concerned assessee must furnish a copy of the special certificate issued by the concerned medical authority under the Persons with Disability Act, 1995, along with income tax return details.
– For a continuous claim of this particular deduction, the disability level and current conditions require occasional reassessment. Under such circumstances, you must obtain a renewed certificate from the concerned medical authorities, provided the original certificate has expired.
Section 80DDB deductions for medical treatment:
Section 80DDB of the Income Tax Act allows specific tax deductions for taxpayers due to the treatment of certain specific ailments. As per this section, the concerned taxpayers must be individuals and belong to HUFs. However, it must be noted that these deductions cannot be made either from long-term or short-term capital gains.
You must note that no NRIs are eligible for the deductions under this category. Any other entities other than Indians are eligible for this deduction.
Medical expenses that fall under Section 80DDB:
If any taxpayer or dependent suffers from any specific ailment listed becomes eligible for claiming tax deduction under Section 80DDB:
1 Any Indian individual or HUF is eligible to claim it.
2 Exclusively resident Indians are permitted to claim.
3 When the concerned taxpayer has incurred medical treatment expenses for any dependent
4 The dependent person must be either parents, spouse, sibling, or children.
5 If the concerned dependent individual is insured and receives some payment from any insurance company or gets medical reimbursement from any employer, that amount gets automatically deducted from this deduction.
Important points to remember:
1 Deductions can be claimed exclusively on the expenses incurred in the previous year.
2 During the determination of the actual amount for the deduction, the concerned individual receiving the medical treatment is considered, rather than the age of the assessee or the claimant.
3 The amount claimed for deduction under Section 80DDB; you are not allowed to claim for any deduction under Chapter VIA.
Deduction limit under Section 80DDB:
The optimum deduction limit under Section 80DDB of the Income Tax Act since 2018-’19 stands at INR 40000, or the actual amount of expenses incurred, whichever is lesser, for people aged below 60 years. For people aged 60 years or above, this deduction limit is either INR 100000 or the actual expenses, whichever is lower.
These deductions are eligible for claiming for each financial year only. All the payments that are made for your parent’s health insurance must be made in any mode like net banking, credit card, debit card, DD, or cheque but not cash. No cash transaction is eligible for this deduction under this category.
Preventive health check-ups under 80D deduction:
Since 2013-’14, the government has introduced the deduction facility for preventive health check-ups to encourage a more proactive healthcare approach. The principal idea behind this is the early detection of any ailment.
Section 80D involves a special deduction of no more than INR 5000 for any expenses incurred for preventive health check-ups. Depending on the circumstances, the overall limit of this deduction is either INR 25000 or INR 50000.
This particular deduction can be claimed either by self, parents, dependent children or spouse.
Unlike other health insurance deduction claims, these health check-up payments are eligible for deduction claims even for cash payments.
This is a comprehensive guide regarding methods of tax saving through parents’ health insurance and optimises your income tax return. To avoid misunderstanding, you can make a clear assessment beforehand and claim your taxes well. You can avail of a maximum of INR 25,000 or 50,000 of tax benefits for paying a premium for the health insurance for your parents, depending on whether any of them are more than 60 years of age or not. However, this facility, as mentioned before, is available only if you file your taxes under the Old Tax Regime. Hence, it is a good practice to plan your taxes in advance to make the most of it and avoid the last minute rush.
Disclaimer: The above information is for illustrative purposes only. For further details, refer to policy wordings and prospectus before concluding the sales.