After life insurance, health insurance is perhaps the most imperative plan you should have in your 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 you incur on your medical treatment. Just like life insurance, a health plan acts as a very efficient tax saving tool. It provides you the 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 25,000 and is extendible to Rs. 50,000 (w.e.f. April 1, 2018) for senior citizens. Thus, it enables an individual to enjoy a maximum deduction of Rs. 75,000 from the taxable income. In rare cases, the age of both the proposer and his parents is above 60 years. The deductible amount in such cases extends up to Rs. 1,00,000 (Rs. 50,000+Rs. 50,000).
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.
As per Income tax laws for the financial year 2018-19, there are 5 important things to know about the tax benefit of health insurance plans.
Let us see a table that will demonstrate the tax benefit on the 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 and your parents are below 60 years of age |
Rs. 25,000 + Rs. 25,000 |
Rs. 5,000 |
Rs. 55,000 |
Where you are below 60 years and your parents are senior citizens (60 or above)
|
Rs. 25,000 + Rs. 50,000 |
Rs. 5,000 |
Rs. 80,000 |
Where you are 60 years or above and your parents are senior citizens (60 or above) |
Rs. 50,000 + Rs. 50, 000 |
Rs. 7,000 |
Rs. 1,07,000 |
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 sound by waving off the sky-rocketing medical bills when they face any medical emergency.
You may like to Read: Section 80C |
|
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. 25,000 |
Rs. 25,000 |
Rs. 50,000 |
Proposer’s parents have attained the age of 65 years |
Rs. 25,000 |
Rs. 50,000 |
Rs. 75,000 |
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 must take the following factors into account while buying a health insurance policy.
You may also like to Read: Tax Exemption on Health Insurance |
Analyze their requirements. For example, in case any of your parents need 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.
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.
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 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.
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.
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.
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.
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.