Key Points about Tax Deduction Based on Health Insurance Premiums
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 expenditures as well as saving yourself from tax burden. That is, you can claim a tax deduction under section 80d of the Income Tax Act and this 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 insurance or a group Mediclaim.
Listed below are some key points about mediclaim deduction that will help you save on your taxes.
Deductions on Premium
Although, 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.
- The first thing to note about deductions on the premium is the type of policy you opt for.
For instance, as an individual assessee, you get a deduction up to Rs 25,000 in a financial year if you have opted for a policy that covers self, spouse and dependent children. The amount of deduction is Rs 50,000 if either you or your spouse is a senior citizen. Furthermore, if you have opted for a policy covering your family including your senior citizen parents, the mediclaim 80d deduction amount is Rs 75,000. Moreover, if you are a senior citizen too, your deduction amount is Rs 1,00,000.
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 premium calculator.
- The second thing to note is the fact that these tax deductions are applicable for insurance premium paid for all types of health insurance plans viz. group mediclaim policy by your employer, family floater plans, etc. However, if the premium is paid by your employer, then you cannot make a claim for tax deductions.
- Thirdly, in case you bought a single premium mediclaim policy for the validity of over one year by paying a lump sum premium at one go, then you can claim 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 can get the deduction of Rs 17,000 for each year.
- Also, to claim the tax deductions, the minimum sum assured in your insurance plan must be at least 10 times the single premium paid.
Avoiding Cash Payments for Premiums
In order to secure your health insurance tax benefit, you must never make payments for the premiums in cash. Instead, you should opt for other payment modes like debit/credit cards, cheque or net banking.
Deductions on Preventive Health Check-Ups
You are also eligible for tax benefits on the expenses which you incur towards preventive health check-ups. This provision has been given under Section 80D of the I-T Act w.e.f April 2018 wherein you get an additional deduction of Rs 5,000. It can be claimed either by you, your spouse, your dependent children or parents. In case your family includes senior citizen parents, the amount of deductible is Rs 7,000.
Unlike in case of payment of health insurance premiums, you are eligible for the tax benefits even if you pay for preventive health check-ups in cash.
For example, you paid a premium amount of Rs 22,000 in a financial year for a Mediclaim policy you purchased for yourself, your spouse and kids. You also availed a preventive health check-up worth Rs 5,000.
The deduction towards preventive health check-up will be Rs 3,000 since the overall deduction cannot be more than Rs 25,000 as specified under section 80D.
You must note that this deduction is applicable only to the medical check-ups done before the treatment and not during or after the treatment.
Service Tax not eligible for Deduction
The service tax, which is applicable to the premium paid for the health insurance policies, does not qualify for the tax deductions.
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, as mentioned below, must be furnished:
- Receipt of payment made towards preventive health check-ups
- Copy of the health insurance policy that specifies the family members’ name, their relation and age
- Medical bills and invoice of medicines purchased, in case you make a claim on the deduction for senior citizens’ medical expenses
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, then 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. their age is above 60 years
- You or your parents are not already covered under any health insurance