2024-04-01 02:10:34
Tax exemption with security cover
Your comprehensive health insurance policy acts as a safety net during any medical emergency. Whether the policyholder or his family members are hospitalized or staying in day-care, they get many benefits from this policy including cashless hospitalization. Apart from all this, tax benefits are also associated with health insurance. Under Section 80D of the Income Tax Act, 1961, premiums paid for health insurance policies are tax exempt.
Benefits of multi-year policy in health insurance
Once you have made up your mind to take a health insurance policy, you should know that when purchasing it, individuals often get multi-year policies. A multi year health insurance policy is one that provides coverage for more than one year. Its tenure is usually two-three years. Meaning, pay money once and enjoy its benefits for two years.
What are the benefits of buying a multi-year health insurance policy?
There are many benefits associated with a multi year policy. In an annual policy, you have to face the problem of renewing it every year. If you are not able to renew it on time, you may also be deprived of the benefits it provides. In contrast, multi-year health insurance policies, which can be purchased for up to 3 years, can save you from those hassles by securing your coverage for a specific number of years at a time. Multi-year health insurance policies do not need to be renewed every year.
Premium will not increase
In annual policy, it has been seen that the premium of health insurance policy increases every year. When you go for annual renewal you find that the premium in the policy has increased. But, with multi-year health insurance policies, individuals get the benefit of locking the premium for a specific period. This protects them from the burden of potential increases while providing financial relief in times of inflation.
Discounts and savings too
Apart from providing adequate coverage, this policy also offers opportunities for discounts and savings. Most health insurers offer a discount of up to 10% if you choose a policy for a two-year term and up to 15% if you choose a policy for a three-year term. Thus, these policies are more affordable and can be easily purchased by the middle income group. Multi-year health insurance policies can also be beneficial for senior citizens who may have to pay higher premiums due to their age.
how much tax exemption
An individual or Hindu Undivided Family (HUF) can claim tax deduction under Section 80D of Income Tax for health insurance premium. The upper limit of tax deduction for a health insurance policy is Rs 25,000 for self, spouse, dependent children or parents. For family or parents who are senior citizens, the upper limit is Rs 50,000.
How to avail tax exemption in multi year policy?
Individuals purchasing multi-year policies are often skeptical about tax-deduction. Tax deduction is determined proportionately for each year depending on the policy term as per the current tax deduction rules. Suppose, if individuals pay a lump sum premium of Rs 60,000 for a three-year health insurance policy, they can claim an amount of Rs 20,000 each year as tax deduction under Section 80D of the Income Tax Act. If a senior citizen pays Rs 1.5 lakh as premium for a multi-year policy, the deduction limit as per tax rules will be Rs 50,000 each year. Therefore, they can claim Rs 50,000 in the first year and then claim the remaining amount for the next two years. To avoid any confusion, insurance companies also issue a tax certificate stating the amount that can be claimed annually under Section 80D. Now the point to be noted here is that to be eligible for tax deduction, the mode of payment of premium should not be cash.
You can also include mother-in-law and father-in-law
Some policies may also cover in-laws. However, the premium paid for it may not be eligible for tax deduction. Tax payers who opt for the new tax regime will not be able to avail deductions as compared to those who opt for the old tax regime.