Tax saving plans are a part of financial planning but you should not buy an insurance policy just because it is helpful in tax saving. The prime objective of buying insurance is the financial protection of you and your family against the uncertainties of life. Due to worsening lifestyles, increasing pollution in urban areas of the country, and the rising cost of living & healthcare expenses, it is important to buy health and life insurance for you and your family according to the requirements.
It would be the last thing to see yourself in a place being unable to give a proper healthcare facility due to lack of finances and family suffering in your absence financially. Buying insurance could be a better option rather than suffering, here are three sections of the income tax act 1961 that helps you in saving taxes while protecting your family and yourself as well.
It is a well-known section for availing tax benefits while investing in a few securities and buying insurance. Under this section, you will be able to save your tax if you pay the life insurance premium for you or your spouse or children up to ₹1,50,000. In other words, you can claim a deduction from income up to ₹1,50,000 being the said amount is the maximum limit of this section.
It needs to be noted that if your spouse is employed and you have only one insurance policy, then only one of you can claim a deduction, both will not be able to claim deductions on the same insurance policy.
This section is also related to life insurance in which you can claim an exemption of the maturity amount received after satisfying the condition of the section. Some of the essential conditions are as follows:
Your insurance premium should not be more than 10% of the maturity amount if insurance was bought after 1st April 2012.
In the case where a policyholder, which can be you or your spouse or children, is suffering from severe disability, then such a premium limit increases to 15%%.
This section provides you the benefit of the tax deduction on payment of medical insurance for your spouse, children, and parents. Under this section, you can also claim a deduction on preventive health checkups (PHC) up to ₹5,000 for self & family and ₹7,000 for parents. The maximum deduction limit is as follows:
If you + family and your parents are both below the age of 60, you can claim a deduction of up to ₹25,000. The total maximum limit will be ₹50,000 (including PHC).
In the case, if you + family and your parents, both are above 60 years of age you can claim medical deductions up to ₹50,000 each, being a total maximum of ₹75,000 (including PHC).
If you + family are below 60 years of age and your parents are above 60, then you can claim ₹25,000, and payment towards your parent’s health insurance premium limit will be ₹50,000. The total maximum limit including PHC will be ₹1,00,000.
The benefits of deductions are given primarily to take responsibility for your family and parents as well so that you don’t have to suffer due to a personal financial crisis. It would be the best idea to protect yourself and family financially before giving them any luxury.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com