Maintaining work-life balance has perhaps never been more difficult for many corporate employees than during the time of the Covid-19 pandemic. As if that wasn’t 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 for ending the tax savings exercise for fiscal year (FY) 2020-2021 is March 31, and many employees leave this task for completion at the last minute. However, doing this should be avoided at all costs. There is a high possibility of making mistakes and locking funds in an inappropriate investment when you try to complete the tax saving exercise in a hurry. Ideally, a taxpayer should start tax planning from the beginning and avoid doing it only at the end of the tax year.
The process for claiming the income tax deduction begins with the selection of one or more of the specified investments or expenses where the income tax rules allow tax exemptions. These can include PPF, life insurance, and health insurance, among others. Once the amount has been paid or invested, the receipt must be given to your employer as documentary evidence to claim the tax benefit.
As an employee, you must stick to the deadline to provide proof of tax savings to your employer on time. This will help you take advantage of tax deductions and keep your tax liability at bay. However, with just a few days until the fiscal year ends, your employers may no longer entertain investment receipts. If you still want to take advantage of the tax benefits, you can do so by claiming them while filing your income tax return for tax year 2021-22, which is the appraisal for tax year 2020-21.
And, an important avenue that you may even consider now that is also part of financial planning is health insurance. You can consider purchasing a health insurance policy in any of the following scenarios:
- If you don’t have any coverage for yourself or your family members
- If you want to improve coverage for yourself or your family members
- If you want to buy or improve coverage for family members like spouse, children or parents.
Why Adequate Coverage Is Important
The cost of hospitalization is rising, and the recent incidence of the coronavirus has shown that hospital bills can easily run into the few billion. Rather than tapping into your savings for crucial life goals, having adequate coverage for your family members and themselves to take care of health risks is the right step forward.
Coverage for you and your family
If you are covered by a group health insurance policy provided by your employer, you do not get any tax benefits as you do not pay the premium. A group health coverage, however, can only complement existing coverage, but relying entirely on it is not the right approach.
Depending on the city you reside in, the type of hospitals in your area, your medical history, and your age, get adequate coverage for yourself and all members of your family. Health emergencies can arise at any time and with any member of the family. Those employees with a small family and younger children can opt for Family Floater health insurance plans, while others, especially middle-aged employees, can opt for individual plans.
In a Family Floater plan, the sum insured (coverage) is common for all members and anyone can take advantage of it. These plans have lower premiums than individual health coverage and are suitable for families with young children, since the probability of getting sick for all members is very low.
However, if you or your parents have a medical history, it is best to purchase individual health coverage to try and build a claim-free history over the years. Also, you can buy a health insurance policy in the name of your parents if they depend on you. Children over the age of 30 are generally not covered by Family Floater plans, and therefore parents must purchase individual plans or even senior health insurance plans available exclusively to them.
Of the different types of health insurance plans offered, you may also consider purchasing serious illness plans for both yourself and your parents. Unlike an individual health plan, where hospital bills are reimbursed, in a critical illness plan, the full sum insured is paid in the event of a specific illness.
Tax benefits on the premium paid
The premium you pay for your health insurance plans, including critical illness policies, qualify for the income deduction under section 80D of the Income Tax Act of 1961.
The tax benefit will vary according to the age of the insured. For those who are up to 60 years old, the maximum deduction limit is Rs 25,000 per year, while for those who are over 60 years old, that is, seniors, the maximum limit of the premium that will qualify for the income deduction it is 50,000 rupees.
To claim health insurance tax deductions, here is a step-by-step guide:
Step 1: Consider age and know your deduction limits:
- If your age is under 60: up to Rs 25,000
- If your age is under 60 and the age of your parents is also under 60: ‘Up to Rs 25,000’ plus ‘Up to Rs 25,000’ – Total up to Rs 50,000
- If your age is under 60, but the age of the parents is over 60: ‘Up to Rs 25,000’ and ‘Up to Rs 50,000’ – Total up to Rs 75,000
- If your age is over 60 and the age of parents is also over 60: ‘Up to Rs 50,000’ and ‘Up to Rs 50,000’ – Total Up to Rs 1 lakh
Step 2: Preventive health check: If you undergo a preventive health check for yourself or a family member, you can also get a tax benefit on the amount paid for it. The maximum amount of deduction under this heading is capped at Rs 5,000 and is within the section 80D limit.
Step 3: Tax Certificate – Once the premium is paid to the insurer, you will receive a tax certificate showing that the premium paid qualifies for the tax benefit under section 80D. You can also download it by logging into the insurer’s website.
Step 4: Send the certificate to your employer or claim the deduction while filing your income tax return.
Get Good Health Insurance Coverage Today!
As an employee, while saving to meet your goals, it is equally important to protect your savings. A medical demand can harm your body in the absence of health insurance. Therefore, it is important to get adequate coverage for yourself and your family and also to enjoy the tax benefits on the premium you are paid. Bajaj Allianz General Insurance offers individual and Family health insurance plans plus critical illness plans to choose from.
You can customize any of these plans based on your needs. Even if you haven’t purchased any health insurance policies so far, you can do so before the March 31, 2021 deadline and still claim the tax benefit while filing your income tax return for tax year 2021-22.
Remember, however, that tax benefits should not be your primary and only goal in obtaining health insurance. That could lead you to have inappropriate financial products in your portfolio, which could lead to financial losses. Instead, get health insurance to improve your financial planning. Not only will it provide you with long-term financial protection, but it will also provide you with short-term tax benefits. Insurance is the subject of the application. For more details on benefits, exclusions, limitations, terms and conditions, please read the wording of the sales brochure / policy carefully before concluding a sale.