Tax Benefits on a Health Insurance Policy

After life insurance, health insurance is perhaps the most imperative plan one should have in his/her portfolio. It works in a simple manner, the insured pays regular premiums to the insurer in return of which the insurer promises to cover him financially in case of a medical contingency. But there’s more to health insurance than just reimbursing the individual for the expenses he/she incurs on his/her medical treatment. Just like life insurance, a health plan acts as a very efficient tax saving tool. It provides the insured substantial tax exemption under section 80D.

Despite the medical benefits of health insurance, a policy reduces your annual income tax liability subject to the premium paid for the same. In fact, the premium paid for not only you and your family but also your parents makes you eligible for income tax exemption under section 80D of Income Tax Act, 1961.

As per Section 80D of the income tax act, the premium paid towards a health insurance plan is deductible from the taxable income. The upper limit for this deductible amount is Rs 15,000 and is extendible to Rs 20,000 for senior citizens. Thus, it enables an individual to enjoy a maximum deduction of Rs 35,000 from the taxable income. In rare cases, the age of both the proposer and his parents is above 65 years. The deductible amount in such cases extends up to Rs 40,000 (Rs 20,000 + Rs 20,000)

If your annual income falls under tax liability, then you must have a health insurance policy not only because you are eligible enough to purchase one but also because you can claim income tax exemption to a certain extent. Want to know how premium paid for health insurance of your parents reduces tax liability? This article will let you know how to save on tax, based on the premium paid for health insurance of your parents.

Every health insurance policy permits you to avail tax benefit on the premium payment of health insurance policy whether it belongs to you, your spouse, children, or parents. When you buy a health insurance policy for your parents, you must ensure that you include adequate coverage. Instead of looking for a higher tax benefit, try to opt for a policy that offers coverage for possible medical conditions with reference to your parents. Doing this will help you to get the maximum possible benefit out of the health insurance policy.

Now, read further to know how you can avail tax benefit, based on the premium paid for health insurance for your parents.

The premium paid for any health insurance also provides tax benefits by reducing your annual taxable income, and therefore, your tax liability for a particular financial year.

Tax Benefits under Section 80D of the Income Tax

As per Income tax laws for the financial year 2015-2016, there are 5 important things to know about the tax benefit of health insurance plans.

1. Under Section 80D of the Income Tax Act, you can avail the tax benefit on premium paid for the health insurance for your parents, irrespective of the fact that your parents are dependent on you or not.
2. Under Section 80D of the Income Tax Act, you can avail the tax benefit up to Rs. 30,000 (including preventive health checkups annually), based on the premium payment made by you for health insurance of your parents where your parents are senior citizens (60 years or more) and you are below 60 years.
3. In case your age is 60 years or above and you still pay the premium for a health insurance policy of any of your parents (who must be senior citizens too), you can avail tax exemption up to Rs. 60,000.
4. Income Tax Law also permits you to avail tax exemption up to Rs.5000 for the expenses incurred for preventive health checkups of your parents who are above 60 years.
5. In case your age is 60 years or above and you take care of the preventive health checkups of your parents who are 80 years or above, you are eligible to avail tax benefits up to Rs. 65,000.

Let us see a table that will demonstrate the tax benefit on health insurance premium of parents in a better way:

Practical Scenario	Tax Exemption on the Premiums Paid	Tax Relaxation on Preventive Health Check-up	Total Tax Exemption
Where you are below 60 years and your parents are senior citizens (60 or above)	Rs. 25,000 + Rs. 30,000	Rs. 5,000	Rs. 60,000
Where you are 60 years or above and your parents are senior citizens (60 or above)	Rs. 30,000 + Rs. 30,000	Rs. 7,000	Rs. 65,000

 

Hope the aforementioned information must have helped you to know how much your tax liability is this annual year and how you can save on income tax based on the premium paid for a health insurance policy for your parents. Now, read further to know some important things that will help you to maximize your tax saving when you buy a health insurance policy for your parents.

Being a caring daughter or son of your parents, buying a health insurance policy that offers suitable protection is a difficult task. A health insurance policy should help you financially by waving off the sky-rocketing medical bills when they face any medical emergency.

You may like to Read: Section 80C

Let Us Understand It with an Example:

	Upper Cap of Deduction When the Plan is Bought for Self, Spouse, Children	Upper Cap of Deduction When the Plan is Bought for Parents	Total Deduction from the Taxable Income
Proposer’s parents haven’t still attained the age of 65 years	Rs 15,000	Rs 15,000	Rs 30,000
Proposer’s parents have attained the age of 65 years	Rs 15,000	Rs 20,000	Rs 35,000

Illustration

Mr. Tarique is a businessman aged 40 years. He buys two health insurance plans, one for his spouse with an annual premium of Rs 12,000 and the other one for his father aged 67 years with an annual premium of Rs 18,000. Thus, the total deductible amount from his taxable income sums up to Rs 30,000 (12,000 + 18,000).

You may also like to Read: Tax Exemption on Health Insurance

Understand Their Needs

Analyze their requirements. For example, in case any of your parents need a surgery or treatment in the next two years, you must find a health insurance policy that covers the expenses of that particular surgery. Never be dependent on your employers’ group health insurance for your parents. It may partially or not cover the surgery that is important for your ageing parents.

Opt for a Lifelong Policy

It is recommended to choose a health insurance policy that covers your parents for their entire life. Make sure you buy a health insurance policy for your parents before the age of 69 years, because buying it after this age limit is extremely difficult.

No Medical Check up Till Age of 69

Insurers offer health insurance policies that do not require any medical check up for senior citizens who are below 69 years of age. You can opt for such policies, in case you do not live with your parents and it is difficult for them to get the mandatory tests done on their own.

Look for a Specialist Mediclaim Advisor

Look for an agent who specializes in offering health insurance policies and can assist you professionally when you need to file a claim. An advisor will also help you to find the best health insurance policy for your parents.

Renewal Ceasing Age

Make sure you notice the Renewal Ceasing age, in case you are planning to buy a mediclaim policy. Renewal ceasing age is the age when the coverage will come to an end and cannot be renewed any longer. For instance, some senior citizen health insurance policies cease renewals at the age of 70 years.

Declare Current Health History

Make sure you share the health history of your parents with the insurer honestly before buying any policy. Any misrepresentation or wrong information in the proposal form regarding the medical history of your parents may result in cancellation of the policy. Please ensure that all the facts are true and clear.

Pre-Requisites for Section 80D

Health insurance benefits under section 80D are available only to individuals and Hindu Undivided Family (HUFs). It is of not available to corporate firms. Also, the benefits can be availed only when the payment of premium is made through cheque or DD. It is not applicable when the payment is made through cash.

Section 80D has been evolved into two more sections to serve specific insurance needs.

• Section 80DD - If an individual undertakes the financial responsibility of bearing the expenses for treatment of a dependent handicap, the tax deductible amount extends up to Rs 50,000. For severe cases, this limit is further extended to Rs 1,00,000.
• Section 80DDB- The expenses incurred by an individual on the treatment of certain diseases (as given below) are tax deductible. The upper cap on this amount is Rs 40,000 (for those aged below 65 years) and Rs 60,000 (for those aged above 65 years). Diseases covered under section 80DDB are cancer (malignant), AIDS, neurological disorders, Parkinson’s disease, hemophilia, thalassaemia and chronic renal failure.

Conclusion!

Buying a health insurance policy is not a financial investment, but it is a shield that protects you against several unfortunate events. Always consider the coverage and benefits of the health insurance policy for your parents. However, any premium paid for health insurance policy helps in tax saving. Therefore, make sure you consider all the aforementioned tips while buying a health insurance policy for your parents.

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