Important Things to Know When Claiming Health Insurance Tax Benefit

Although the main objective of health insurance plans is to protect you and your family in the event of a medical emergency, they also offer an advantage in terms of receiving tax deductions which will increase your savings

We at Aditya Birla Health insurance are here to educate you about how you can receive tax deductions and maximize your health insurance tax benefits.

Eligibility Criteria for Health Insurance tax deductions

The first criteria is related to the health insurance policy holder’s age, the age of the members covered and the number of members covered.

If the policy covers you, your partner, and your dependent family members, you are eligible for a tax deduction of up to Rs 25,000 Additionally, if your parents are below the age of 60 and you pay their health insurance premium, you are eligible for another tax deduction of up to Rs 25000 According to Section 80D of the Income Tax Act of 1961, if you are above the age of 60, you are eligible for a maximum tax deduction of Rs 50,000 and you are eligible for an additional Rs 50,000 if you pay the premium for your parents who are senior citizens.

The second criteria is that these tax deductions are applicable on premiums only you pay. For example, if your employer pays your health insurance premium, you cannot avail any tax deductions.

Tax deductions on multi-year health insurance plans

Tax deductions in this category apply only to those policyholders that paid the health insurance premium for multiple years together, in the form of a lump sum payment. The maximum tax deduction you can receive is proportional to the number of years in the policy period; for instance, if your health insurance premium cost was Rs 30,000 and your policy period is 2 years, you are eligible for maximum tax deductions of Rs 15,000 for each year.

Preferred payment method when paying health insurance premiums

Tax deductions are only applicable if the health insurance premiums are paid through debit/credit cards, cheques, net banking, or other online services. The government needs to maintain a record of the premiums paid; thus, you can avail maximum tax benefits by always avoiding payment through cash.

Tax deductions for self-employed individuals

For self-employed individuals, any monetary investment made towards a health insurance plan is tax-deductible. The tax deduction claim of self-employed individuals is based on their adjusted gross income. Their income is classified under the category termed ‘income from business or profession’, which proves they do not have a fixed monthly/annual income to tax accordingly.

Keep relevant documents ready

When claiming tax deductions on your health insurance premium, you must be aware of all the documents that need to be submitted, which will be listed on your insurer’s website. In most cases, policy details, payment proof, income proof and bank statements are required.

When should you claim tax deductions on health insurance?

In some cases, the medical insurance premium is already tax-free so do check before going ahead with the procedure.

In most cases, at Aditya Birla Health Insurance, for example, you can claim tax deductions from the next financial year after purchasing the health insurance plan. We will also send you a certificate annually that states how much you can claim as tax deductions for that financial year.