There are a number of sections under the Income-Tax Act that give additional tax benefits on medical insurance premium.
Health insurance forms a major part of the financial planning for every individual. One gets tax benefit on the premium paid for health insurance policy. And, if one takes a little precaution while structuring premium payments, it could ensure that the entire family is able to get more tax deductions.
Family outlook
One needs to ensure that he/she is able to get maximum tax benefit available for health insurance. Section 80D provides a deduction for contribution towards the health insurance premium to the extent of Rs 15,000 paid for self and family. If the policyholder is a senior citizen, the benefit can increase to Rs 20,000.
Mostly people take only this benefit into account and consider the maximum limit here to be the highest amount that can be utilised for tax benefit. However, an additional deduction is possible and can be utilised.
Dependent parents
The health insurance premium cost rises with the age and that's the reason why many find the maximum investment limit available for deduction to be very less. The Income Tax Act allows one to apply for benefits provided to senior citizens at the age of 65 years. And by this time, the premium cost goes up manifold.
There are many instances where elderly parents and their children both are paying for the health insurance policy. This could be used for the benefit of the family by asking for a higher deduction.
There is an extra benefit available for the individual taxpayers if they pay health insurance premiums for their parents. Here, an extra benefit of Rs 15,000 is available, which increases to Rs 20,000 if the parents are senior citizens. This amount is over and above the other limit for individuals, so that there is an extra benefit available for the person. This can also be structured so that a higher deduction could be claimed.
For example, an individual pays a premium of Rs 15,000 for his family and his parents (senior citizens) pay a total premium of Rs 34,000 a year. Under normal circumstances, the benefit available for the individual will be Rs 15,000 and another Rs 20,000 to the parents, as they are above 65 years of age. But, by paying Rs 14,000 out of the total premium of the parents by the individual, the individual can get a total benefit of Rs 29,000 (Rs 15,000 + Rs 14,000). The parents, on the other hand, can claim a deduction of Rs 20,000. So, the total benefit available to the whole family is worth Rs 49,000.
The final word
Similarly, in other cases where premiums rise, there can be effective spreading out of payments by different people in the family to get the maximum deduction. The earning individual in the family could ensure a higher deduction is available considering the age of his parents.
An earning couple incur a higher health insurance premium cost. They can both claim deductions separately by paying separate premiums and ensuring deduction on both premium payments.
The writer is a certified financial planner
