March 19, 2021 11:40:06 am
Maintaining work-life balance has perhaps never been as challenging for many corporate employees as during the times of the Covid-19 pandemic. As if that was not enough, to add to the pressure of delivering projects on time and meeting deadlines, the month of March has come with its own share of discomfort for many employees.
The due date to finish the tax-saving exercise for the financial year (FY) 2020-2021 ends on March 31 and many employees leave this task to be completed at the last minute. However, doing this should be avoided at all cost. There is a high possibility of committing mistakes and locking-in funds in an unsuitable investment when you try completing the tax-saving exercise in a hurry. Ideally, a taxpayer should initiate the tax planning early-on and avoid doing it only at the fag end of the FY.
The process to claim income tax deduction starts with selecting one or more of the specified investments or expenses on which the income tax rules allow tax breaks. These may include PPF, life insurance, and health insurance, amongst others. Once the amount has been paid or invested, the receipt needs to be furnished to your employer as documentary proof to claim tax benefit.
As an employee, you should stick to the deadline of furnishing the tax saving proof to your employer in time. This will help you take advantage of tax deductions and keep the tax liability at bay. However, with only a few days left for the FY to end, it is possible that your employers may not entertain the investment receipts anymore. If you still want to take advantage of the tax benefits, you can do so by claiming the same while filing your income tax return for the assessment year 2021-22, which is assessment for FY 2020-21.
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And, one important avenue that you may even consider now and which is also a part of financial planning is medical insurance. You may consider buying a medical insurance policy under any of the following scenarios:
- If you do not have any coverage for self or family members
- If you want to enhance coverage for self or family members
- If you want to buy or enhance coverage for family members such as spouse, children or parents.
Why adequate coverage is important
Cost of hospitalization is increasing and the recent incidence of Coronavirus has shown that the hospital bills can easily run into a few lakhs. Instead of dipping into your savings earmarked for crucial life goals, having an adequate coverage for self and family members to take care of health risks is the right step forward.
Coverage for you and family
If you are covered under a group health insurance policy provided by your employer, you do not get any tax-benefit as the premium is not paid by you. A group health cover, anyhow, can only supplement the existing coverage but relying entirely on it is not the right approach.
Based on the city you reside in, type of hospitals in your area, your medical history, and age, get adequate coverage for self and all family members. Heath emergencies may arise anytime and with anyone in the family. Those employees with a small family and younger kids may opt for Family Floater Health Insurance plans while others, especially middle-age employees, could opt for individual plans.
In a Family Floater plan, the sum insured (coverage) is common to all members and anyone can avail it. Such plans have lower premium than individual health covers and suit families with young kids as the probability of falling ill for all members together is very low.
However, if you or your parents have a medical history, it is better to buy individual health cover to try and build a claim-free record over the years. Also, you can buy a health insurance policy in the name of your parents if they are dependent on you. Children above age 30 are generally not covered in Family Floater plans and hence parents need to buy individual plans or even senior citizen health insurance plans exclusively available for them.
From the different types of health insurance plans on offer, you may also consider buying Critical Illness plans both for self and parents as well. Unlike an individual health plan, where the hospital bills are reimbursed, in a critical illness plan, the entire sum insured is paid on the occurrence of a specified ailment.
Tax Benefits on premium paid
The premium that you pay towards your health insurance plans including critical illness policies qualifies for income deduction under section 80D of the Income Tax Act, 1961.
The tax benefit will vary as per the age of the insured person. For those who are up to the age of 60, the maximum limit of deduction is Rs 25,000 a year, while for those who are above age 60 i.e. senior citizens, the upper cap on the premium that will qualify for income deduction is Rs 50,000.
To claim health insurance tax deductions, here is a step-by-step guide:
Step 1: Consider the age and know your deduction limits:
- If your age is below 60: Up to Rs 25,000
- If your age is below 60 and parents’ age is also below 60: ‘Up to Rs 25,000’ Plus ‘Up to Rs 25,000’ – Total Up to Rs 50,000
- If your age is below 60 but parents’ age is above 60: ‘Up to Rs 25,000’ and ‘Up to Rs 50,000’– Total Up to Rs 75,000
- If your age is above 60 and parents’ age is also above 60: ‘Up to Rs 50,000’ and ‘Up to Rs 50,000’– Total Up to Rs 1 lakh
Step 2: Preventive health check-up: If you undergo a preventive health check-up for self or any family member, you can also get tax benefit on the amount paid towards it. The maximum amount of deduction under this head is capped at Rs 5,000 and is within the limit of section 80D.
Step 3: Tax certificate: Once the premium is paid to the insurer, you will get a tax certificate showing that the premium paid qualifies for tax benefit under section 80D. You can download it by logging in to the website of the insurer as well.
Step 4: Submit the certificate to your employer or claim the deduction while filing the income tax return.
Get a good health insurance coverage today!
As an employee, while you save towards your goals, it is equally important to protect your savings. A medical exigency can dent your corpus in the absence of health insurance. So, it is important to get adequate coverage for self and family and also enjoy the tax benefits on the premium paid towards them. Bajaj Allianz General Insurance offers Individual covers and Health Insurance plans for family in addition to the Critical Illness plans to choose from.
You can customize any of these plans as per your need. Even if you have not purchased any Medical Insurance Policy until now, you could do so before the deadline of March 31, 2021 and still claim the tax benefit while filing the income tax return for the assessment year 2021-22.
However, remember that tax benefits should not be the main and sole purpose behind getting a health insurance. That could lead you to having inappropriate financial products in your portfolio, which could lead to financial losses. Instead, get a health insurance to take your financial planning a notch higher. Not only will it give you long-term financial protection, but also provide short-term tax benefits. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
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