Health Insurance in India:
“Health is Wealth”, goes the age old saying, but if numbers are anything to go by, India, a country of over 1.2 billion people is perhaps one of the unhealthiest nations in the world. Health Insurance, as a concept is negligible in our lives, with less than 1% of the population covered under health insurance policies. The government, on its part has doled out tax incentives to individuals, hoping to increase this number, bringing more people under the umbrella of health insurance.
Tax Benefits under Section 80D of the IT Act:
Section 80D of the Income Tax Act has provisions for tax deductions on premiums paid towards buying or renewing an existing health insurance policy. This deduction can be made from the total taxable income of a policyholder towards payment of medical/health insurance premiums.
Quantum of Deductions Available:
Every penny counts when it comes to saving money, and the Union Government in a bid to entice people towards health insurance recently increased the quantum of benefits available by Rs 10,000. The current limit is Rs 25,000 for ordinary taxpayers, while it is Rs 30,000 for senior citizens.
For example, Miss Preethi pays the health insurance premiums for her own policy and her parents. She pays Rs 15,000 towards her premiums and Rs 15,000 towards the premium for her parents. She is now eligible for deductions totalling Rs 30,000 from her total taxable income, thanks to Section 80D.
Eligibility to claim Tax Deductions:
Tax deductions under Section 80D can be claimed by the following sections of the population.
- An individual who has a health policy in either his own name or pays the premium on the health insurance policy for his/her spouse, parents or children.
- Members of Hindu Undivided Families.
When can Tax Benefits from Health Insurance Policies be Claimed?
A taxpayer who pays the premium for a health insurance can claim tax benefits only for those premiums paid during a particular financial year, i.e. if he/she pays premiums during the financial year 2015-2016, then only that amount can be claimed as tax deductions for 2015-16. Tax deductions cannot be claimed for premiums paid in the past or premiums scheduled for future payment and are valid only for the present term.
How to claim Tax Benefits on Health Insurance?
Tax benefits on health insurance policies can be claimed at the time of filing annual income tax returns. Eligible policyholders need to fill out the deduction amount they are entitled to in a particular financial year in the IT return. Supporting documents and proof might also be required while claiming such deductions and an individual should ensure that the information provided is accurate.