Tax Exemptions in Mediclaim Policy
In today’s times, buying a mediclaim policy has more relevance than ever before. Visiting the hospital becomes inevitable when you encounter a sudden medical emergency or undertake a planned treatment for an illness. Having a good mediclaim policy in India not only helps you deal with the huge hospitalization costs but also brings you many tax benefits under section 80D of the Income Tax Act.
The tax advantages are applicable when you buy an individual or a group mediclaim insurance plan. So, the next time you file your income tax returns, you can be assured as you become eligible to claim a deduction under section 80D. While the Indian government is focussing on providing quality healthcare to its citizens, it is also encouraging individuals to opt for medical insurance by offering the tax benefits 80d provision.
Read further to understand how much you can save under the provisions of the Income Tax Act.
Deductions You Can Get Under Section 80D
Based on the mediclaim policy premium you pay, you are entitled to get various deductions under Section 80D. We discuss below the various scenarios and the applicable deductions.
Scenario 1: You buy a mediclaim insurance policy that covers you, your spouse and dependent children.
In this case, you can claim a deduction of Rs 25,000 in a financial year for the premium you pay towards the insurance policy. This is applicable if the insured persons under the policy are below the age of 60 years. An exemption worth Rs 5,000 towards health check-up is also included under the tax benefits here.
However, if anyone among you and your spouse is aged 60 years or above, then you are entitled to a higher deduction of Rs 50,000.
Scenario 2: You opt for a mediclaim plan which covers you, your family and your parents
If your parents are below the age of 60 years, you get an additional deduction of Rs 25,000 in a financial year. In such a case, your total deduction for the year will amount to Rs 50,000 (Rs 25,000 + Rs 25,000).
Scenario 3: You opt for a mediclaim insurance that covers you, your family and your senior citizen parents.
If your father or mother is a senior citizen, then you are eligible to get a deduction of Rs 50,000 in a financial year. Therefore, the total deduction which can be claimed is Rs 75,000 (Rs 25,000 + Rs 50,000) if you are below 60 years.
In case you are a senior citizen too, then the total mediclaim deduction amount is a maximum of Rs 1,00,000 (Rs 50,000 + Rs 50,000).
The category of senior citizens, while referring to the deduction amount of Rs 50,000 for senior citizens in the above scenarios, also includes very senior citizens who are aged 80 years and above.
Deductions for Single Premium Mediclaim Policy
Under a single premium mediclaim policy, a person who is opting for an insurance policy with a validity of over one year makes a payment for the premium amount in a lump sum. That is, he pays the premium in a single year. As per a new government provision announced in Budget 2018, such individuals can claim deduction of a certain amount proportional to the number of years of the policy period. The mediclaim deduction amount is calculated by dividing the total premium amount paid in lump sum by the number of years of the insurance policy.
For instance, if an individual is required to pay a premium of Rs 36,000 for a policy period of 2 years, he can avail the deduction proportionately over the two-year period. The amount would be Rs 18,000 for each year.
Furthermore, in order to avail the tax benefits, the minimum sum assured should be at least 10 times the single premium paid. It has to be noted that the deduction cannot exceed to the limit of Rs.25,000 or Rs.50,000, as applicable.
Conditions When You are Not Eligible for Tax Deductions
- In the case of group health insurance, you are not entitled to receive tax benefits if the health insurance premium is paid by the company.
- You are not eligible for getting tax deductions if you are paying the premium on behalf of working children or for siblings or any member of your extended family.
- You cannot claim the deductions if you have made cash payments for the premiums. Although you can pay in cash for the preventive health check-up, you must avoid making cash payments while paying for the mediclaim policy premium. In order to get the tax benefits, make sure you opt for other payments modes like cheque, debit/credit cards or net banking.
- You are eligible to get tax exemptions even if you receive medical treatment outside India. To ensure this, your mediclaim insurance policy must have this provision. Also, the insurer from whom you buy the policy should be registered with the IRDAI. Otherwise, you cannot enjoy the tax benefits under section 80D.