Author : Kairav Shah/DNA
The ministry’s thrust is not to be missed: bring as many people as possible under the tax net.
For people who haven’t been paying taxes, the message couldn’t be clearer: embrace tax-saving instruments that give you the maximum tax benefit, for the tax burden will only get heavier.
Among the plethora of tax-saving possibilities is health insurance, which has just been made more inclusive.
Hitherto, the premium you pay on health insurance policy was tax-deductible under section 80(D) of the Income Tax Act 1961 subject to a ceiling of Rs 15,000. The health cover could be for the individual, his/her spouse, dependent children, and the individual’s parents, subject to the ceiling.
Budget 2008, however, 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 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:
1. 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 15,000.
2. 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 15,000 in aggregate.
This means, besides a tax exemption of Rs 15,000 on health insurance bought for your family, you can get a further exemption on the health cover(s) bought just for your parents to the extent of Rs 15,000 (Rs 20,000 if they are senior citizens).
Therefore, effectively, you are eligible for Rs 30,000, 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 allowed under Section 80(C) of up to Rs 1 lakh.
So, it isn’t as if you are only providing your family and ageing parents with adequate health cover by buying those policies. You are also saving on tax.
The writer is a certified financial planner at Apnainsurance.com, a comprehensive guide to insurance in India that enables customers to search and obtain the policy cover they need. He can be reached at firstname.lastname@example.org.