How health insurance can help you save taxes

Who does not love dual benefits at the cost of one? And, if the benefits are as big as health coverage and tax benefits, then nothing like it. Yes, investing in a mediclaim insurance can help you gain tax advantages while ensuring financial protection during a medical emergency. According to Section 80D of the Income Tax Act, the mediclaim premium payment is eligible for tax benefits.

However, that should not be your sole reason for purchasing health insurance. In the wake of rising healthcare costs, health insurance assures coverage in time of your need. Here are some important things that you must know before claiming tax benefits on a mediclaim policy.

• What is the maximum allowable tax deduction?
• Who is eligible for tax benefits on health insurance?
• How to claim this deduction?

Tax deductions available for mediclaim policy

• Below 60 years of age – You and your parent

If you are under 60 years old and buying a mediclaim policy for yourself, you are eligible to claim a tax reduction on your premium up to Rs 25,000 every fiscal year. You can deduct an additional Rs 25,000 if you are also paying for health insurance for your parent who is under the age of 60 years.

• 60 years or older – Parent

The deduction amount goes up from Rs 25,000 to Rs 50,000 if you are paying for the individual mediclaim policy for a dependant parent who is over 60 years of age. Therefore, you can claim a tax benefit of up to Rs 75,000 if you buy an individual insurance policy for yourself and your dependant parent aged less than 60 years and over 60 years, respectively. Here, you enjoy a deduction of Rs 25,000 for your policy and Rs 50,000 toward the health insurance premium for your elderly parent.

• 60 years or older – You and your parent

The highest amount of health insurance premiums that can be deducted from your taxes, if you and your dependant parent are both over 60 years of age, is Rs 1 lakh. If you are older than 60 years, you will be eligible for a deduction of Rs 50,000. In addition, you will get a deduction of Rs 50,000 on the premium for your elderly parent.medical insurance

Who can claim tax deductions for health insurance? 

You are qualified for tax deductions on premiums paid for health insurance coverage under Section 80D if:

• You have a mediclaim policy for your spouse, your parent(s), your children, and/or yourself.
• You are a HUF member (Hindu Undivided Family)

How to claim tax deductions on mediclaim policy premiums?

Health insurance tax benefits may be claimed while filing income tax returns. Follow these steps to avail of the benefits:

1: Choose “80D” in the “Deductions” column of your ITR form to claim deductions for health insurance premiums.

2: Next, choose the circumstance in which you are requesting the deduction from a drop-down menu. There will be seven choices, and you can pick the one that best fits your deduction request:

• Both oneself and one’s family
• Family and oneself (over 60 years old)
• Parents (above 60 years of age)
• Self, family, and parents
• Self and family members with parents that are older than 60 years
• Self (over 60 years) and family members with parents over 60 years

3: Now, for the IT team to validate your deduction, attach documents supporting your claim. Be aware that you can only claim a tax deduction for health insurance premiums that you purchased with a credit/debit card, a cheque, a draft, or through net banking. Tax deductions are not available for premiums paid in cash. To correctly claim the deduction, you must also have the accompanying documentation and proofs.

What documents do I need to provide to request the deduction?

The best health insurance in India are those which offers extensive coverage and come with easy hassle free processing where the documentation is minimal. Usually documents required to request the tax deduction are – your receipt for premium payments and a copy of your insurance policy that lists the names of the family members, their relationships, and their ages. Once the premium for the parent’s policy is paid, you must request an 80D certification from the insurance provider and provide payment information in their name.

 When is the right time to claim health insurance tax deductions?

You can claim a mediclaim policy premium tax deduction for that specific fiscal year only. For instance, if you are paying the health insurance premium for the fiscal year 2022–2023, you can only claim the tax deduction when you file your ITR for that year.

Premiums that you previously paid in the previous fiscal year or that you will pay in the future fiscal year are not eligible for deductions.

 Points to Remember

• Analyse your policy’s tax exemptions in detail.
• If you purchase health insurance for yourself and/or your parents and both of your parents are elderly citizens, the maximum deduction under section 80D is Rs 1,00,000.
• Tax benefits are available for several years of insurance coverage if the insurance premium payment is paid all at once.
• HUFs (Hindu Undivided Families) may also claim this exemption for the cost of health insurance premiums for any HUF member.
• The premium must be paid in a method other than in cash to qualify for the deduction. Cash can be used to pay for preventive health examinations, though.
• Tax reductions under Section 80C of a maximum of Rs 1.5 lakh are in addition to those under Section 80D.
• Medical costs may also be covered by the senior citizen deduction amount.

 Conclusion

Health insurance, in addition to protecting your finances from medical costs, Section 80D of the Income Tax Act allows you to receive tax advantages on the premiums you pay for health insurance. Because of this, purchasing health insurance is a smart financial decision and a useful tax-planning tool. To prevent the last-minute rush, submit your ITR a few weeks ahead of the deadline. This will guarantee that you have enough time to provide precise information about your mediclaim policy and claim the appropriate deductions without trouble. Make sure you research enough so that you get the best health insurance in India available. 

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.