Key Things to Remember When Claiming Health Insurance Tax Benefit


Key Things to Remember When Claiming Health Insurance Tax Benefit

Key Points about Tax Deduction Based on Health Insurance Premium

The idea behind buying health insurance is to prepare oneself financially for any medical exigency. However, by opting for a good health insurance policy for your family, you get the dual advantage of protecting yourself from unexpected medical expenditures while saving yourself from the tax burden. You can claim a tax deduction under section 80D of the Income Tax Act, which adds to your savings.

As an income tax assessee, you need to be clear about the criteria based on which you can claim the deductions, irrespective of whether you opted for individual health insurance or a group mediclaim.

Listed below are some key points about mediclaim deduction that will help you save on your taxes.

Know the Eligibility for Deductions on Health Insurance Premium

Buying a health insurance plan with the sole objective of getting tax benefits is not advisable. That way, you might end up being under-insured. However, as an investment, the mediclaim policy premium that you pay qualifies for tax deductions, which makes it one of the advantages of having a health cover.

To make the most of this benefit, you must  be clear about the eligibility:

1. The first thing to note about deductions on the premium is the age and number of persons insured in a policy.

For instance, as an individual assessee, you get a deduction up to Rs 25,000 in a financial year if you have a policy that covers self, spouse, and dependent children. You can also avail of an additional tax deduction up to Rs 25,000 for your parents below 60 years. If either you or your spouse is a senior citizen, the deduction limit is up to Rs 50,000. Moreover, the maximum mediclaim 80d deduction amount one can get is Rs 1,00,000 if the proposer and insured covered are senior citizens aged above 60.

Hence, one must be sure about the eligibility criteria to claim the right amount of deduction under section 80D. Find the premium you need to pay by using the health insurance premium calculator, an online tool that gives you a precise estimate of your premium. 

2. The second thing to note is these tax deductions are applicable for insurance premium paid for all types of health insurance plans viz. family floater plans, senior citizen health insurance, group mediclaim policy by an employer, etc. However, if the employer pays the premium, you cannot claim tax deductions.

Tax Deductions on Multi-year Mediclaim Policy

Suppose you opted for a multi-year mediclaim policy by paying a lump sum premium at one go. In that case, you can claim a deduction proportional to the number of years of the policy period. That is, if you paid Rs 34,000 for an insurance policy of 2-year validity, you could get the deduction of Rs 17,000 for each year. However, this deduction cannot exceed the maximum allowed limit, as applicable.

Avoiding Cash Payments for Premium

To utilise your health insurance tax benefit, you must never make payments for the premium in cash. Instead, you must opt for other secure payment modes like debit/credit cards, cheque or net banking.

Deductions for the Self-Employed

A self-employed assessee is an individual who does not receive a fixed salary from an employer. He/she may be engaged in business (trade, commerce, manufacturing, etc.) or pursue a vocation like a lawyer, doctor, or architect. The income of such individuals is classified under ‘income from business or profession’ category. Self-employed individuals must select the right ITR form (ITR-3 or ITR-4) when filing their tax returns. They are eligible to get tax benefits on investments made towards medical insurance premium and claim a deduction from their gross total income.

When Can You Claim the Tax Deduction for Health Insurance?

If you invest in a health insurance plan, you can claim a tax deduction on the premium amount paid in a financial year. A policyholder will be issued a certificate specifying the deduction he/she can claim in a year. Claiming the deduction will help lower the tax liability.

The mediclaim deduction is a tax-free expense that is subtracted from your gross annual income when filing income tax returns. You must fill in the required details in the form when filing ITR and claim the amount the Section 80D deductions.

Claiming Health Insurance and Coronavirus (COVID-19)

The rising medical inflation rate is a significant factor that has made health insurance a crucial necessity. Besides the ever-increasing lifestyle diseases, the coronavirus pandemic has further increased the health risks. Therefore, investing in health insurance with coronavirus cover is a judicious move that will ensure your family’s financial security. 

You can opt for indemnity-based health insurance plans by Care Health Insurance and get the desired financial protection. Besides getting maximum coverage for an affordable premium, you can look to further savings by claiming a tax deduction under section 80d.

Note: Underwriting of claims for COVID-19 is subject to policy terms and conditions.

GST Eligible for Deduction

An individual is eligible to get a Section 80D tax deduction on the health insurance premium paid to the insurer. The total premium amount of a health insurance policy also includes GST charged at the rate of 18%. Therefore, one becomes eligible to claim a deduction on the total premium amount that includes the tax paid. Salaried individuals must provide complete details of the premium paid when submitting the investment proof to the employer. They can claim the deduction when filing tax returns.

Save Necessary Documents

Finally, any tax deduction you claim under the various sections of the I-T act must be backed by proofs. That is, relevant documents must be furnished, including details of the health insurance policy and premium paid.

>> Check: Tax Deduction under Section 80D for health insurance premiums

You Can Claim Deduction for Medical Expenses Incurred by Senior Citizens in Your Family

Let us suppose you have not purchased any health insurance policy and you have incurred expenses on the medical treatment for yourself or your parents; you can still claim the tax benefits under section 80d. However, you must ensure you meet the following criteria:

  • You or your parents are senior citizens, i.e. the age is above 60 years
  • And, you or your parents are not already covered under any health insurance

Disclaimer: The tax exemptions are subject to the rules and regulations of the Income Tax Act.

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