How To Claim Tax Benefits on Your Medical Insurance Policy?

How To Claim Tax Benefits on Your Medical Insurance Policy?

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People regard medical insurance as one of the most important aspects of safeguarding themselves and their families against the increasing cost of healthcare and medical facilities. The government actively promotes health insurance plans and investments and allows individuals to seek tax deductions on their premiums. Several healthcare plans are available in the market, for example, family health insurance plans, senior citizen health insurance policies and even for the individual himself.

What are the Benefits?

If you own a health insurance policy, you are eligible for tax deductions for health insurance plans for yourself or your family. Section 80D of the Income Tax Act, 1961, lets individuals and their families, especially Hindu Undivided Families, avail of certain tax benefits on the amount of premium paid.

You can avail of the tax deduction advantage when you purchase a family health insurance plan, individual health insurance plan or senior citizen health insurance.

Steps to Claim Tax Benefit on Health Insurance Policy

In order to avail of the benefit of tax deduction, you will have to file an Income Tax Return (ITR). Below mentioned are the few steps that you are required to follow —

  1. When filling an ITR under the deductions column, select 80D claim tax benefit on medical/health insurance plans.
  2. You must choose a criterion under which you will claim the tax benefit. Below are some of the criteria from which you have to choose:
  • Self and family
  • Self (Above 60 years) and family
  • Self and parents
  • Parents above 60 years
  • Self, family and parents
  • Self, family and your parents who are above 60
  • Self above 60, family and parents above 60

Attach supporting documents, like the receipt of the premium payment, for assessment by the income tax department.

Furthermore, you can avail of the tax benefit on your health insurance plan only if you have paid the premium through net banking, credit card, debit card, cheque or a demand draft. You will not receive any tax benefits if you pay the amount in cash.

Eligibility for Claiming Tax Deductions on Medical Insurance

The tax deductions under Section 80D of the Income Tax Return Act (1961) are eligible for the following:

  • Individuals who have purchased medical health insurance for themselves, their spouses, dependent children, or parents.
  • Members of a Hindu Undivided Family (HUF)

The table below will give more clarity.

SCENARIO TAX DEDUCTIONS UNDER SECTION 80D
Medical insurance plan for self and family below 60 years Rs 25,000/-
Medical insurance plan for self, family and parents below 60 years Rs 25,000 + 25,000 = Rs 50,000/-
Medical insurance plan for self and family below 60 years and senior citizen parents Rs 25,000 + 50,000 = Rs 75,000/-
Medical insurance plan for self and family eldest above 60 years and senior citizen parents Rs 50,000 + 50,000 = Rs 1,00,000/-

Tax Benefits for a Multi-Year Health Insurance Policy

If you decide to purchase a multi-year health insurance plan, it gives you additional benefits. The amount of the premium remains consistent until the duration of the policy, which in turn protects you from potential premium increasestill the renewal of the policy.Regarding the tax exemption for the multi-year plan,you can claim it for every financial year the policy is valid.

The Mode of Payment for Your Health Insurance Premium

You can use any of the following modes of payment while purchasing the health insurance policy:

  • Online mode includes net banking, debit and credit card payments
  • Cheque
  • Demand draft
  • Cash

Please note that if you make a cash payment for purchasing a health insurance policy, you will not be eligible to avail of the tax benefits under the Income Tax Act (1961).

What are the Advantages?

The benefits include:

  • Saves money
  • Increases in take-home salary
  • Tax benefit claims of up to Rs.1lakh

Advantages of Buying Health Insurance for Senior Citizens

The tax benefit of senior citizen health insurance policy under Section 80D of the Income Tax Act, 1961 are:

  • You are eligible for tax exemption of up to Rs. 50,000 for every financial year.
  • You are eligible for tax exemption of up to Rs. 5,000 on preventive health check-ups for each fiscal year.

Who is Eligible to Claim Tax Rebate under Section 80D?

People belonging to Hindu Undivided Families and Non-Resident Indians (NRIs) can avail of tax benefits under Section 80D of the IT Act.

Documents required to avail of Tax Benefits on Health Insurance Plans

You will require the receipt of the premium payment and the health insurance policy copy while filling out the Income Tax Return. Moreover, if you have purchased a health insurance policy for your parents, you will be required to procure the certificate from the insurer.

Conclusion

Health insurance is regarded as crucial and has its benefits. You can maximise these benefits after assessing if including your senior citizen parents is beneficial to avail of the maximum benefits the policy offers. Also, remember to avail yourself of the benefit while filling out your ITR.

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