Paying Health Insurance Premiums For Your Parents? Here's How You Can Avail Tax Deductions
A health insurance policy for parents under an employer’s scheme is a comfort source for salaried individuals. However, there is also the rising realisation, that it may not be enough, since healthcare inflation is predicted to rise in double digits. In 2021, as per the MMB Health Trends Report, India had the highest medical inflation rate in Asia (at a whopping 14%). The family floater cover of only Rs 2-3 lakh, provided by most group schemes, may prove to be insufficient in such a scenario.
Therefore, the increasing healthcare costs make it vital to buy health insurance for you and your family. The government encourages everyone to invest in health insurance and allows you to claim tax benefits on health insurance premiums.
In this article, you will get an idea of how you can avail of tax deductions while paying health insurance premiums for your parents.
Tax benefits on Health Insurance:
Section 80D of the income tax act 1961 enables individuals and Hindu Undivided Families (HUF) to avail of tax benefits on the health insurance premiums paid. If your annual income comes under tax liability, you can buy a health insurance plan and claim tax deductions for the premiums you pay.
Whether you buy an individual plan or a family floater plan, you can take advantage of the tax benefits. It can help you save your hard-earned income while protecting you against rising healthcare costs.*
*‘Tax benefit is subject to change in tax laws’:
Types of Deductions:
The following types of deductions can be claimed for tax benefits:
The maximum deduction against the premiums for individuals under 60 years of age is Rs 25,000. If the individuals are over 60 years of age, the maximum amount that can be claimed as a tax deduction is Rs 50,000.
Thus, if you and your spouse are under 60 years of age and your parents are more than 60 years old, the maximum deduction to be claimed is Rs 75,000.*
*‘Tax benefit is subject to change in tax laws’
GST on Health Insurance:
18 per cent GST is charged on the premium paid for health insurance, as per the prevailing regulations. Tax benefits can be claimed under section 80D of the Income Tax Act for the payment made for health insurance policies. For example, if you purchase a health insurance policy with a sum insured of Rs 10 lakh at the age of 30 years from Bajaj Allianz General Insurance Company, you would have to pay a basic premium of Rs 7,843 and GST of Rs 1,412 (18 per cent GST applied on basic premium). The overall premium will add up to Rs 9,255. Similarly, if someone purchases the same policy at the age of 50, then he/she will have to pay a basic premium of Rs 17,782 and a GST value of Rs 3,200. The overall premium will come to Rs 20,983.*
*‘Tax benefit is subject to change in tax laws’
Thus, the amount of GST paid on your insurance premiums can also be included when claiming a deduction under section 80D. Therefore, in each case, you can claim the total premium of Rs 9,255 or Rs 20,983 under section 80D. This tax-saving deduction amount is subjected to an investment limit pertaining to the particular section.
(The above example is taken from Bajaj Allianz General Insurance's website, numbers will differ based on various scenarios. TnC apply)
How to Claim Tax Benefits on Health Insurance Premiums?
You need to claim tax benefits on medical insurance when you file your Income Tax Returns (ITR) for the said financial year. Follow the steps below to get the health insurance tax benefits.
*‘Tax benefit is subject to change in tax laws'
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
