Understand how premium paid towards health insurance for your aged parent’s help you financially by not only saving money for hospitalization but also in saving some tax.
You cannot afford not buying a health insurance plan for your old parents since health is too uncertain. A hale and hearty person can suddenly be bed-ridden due to medical emergencies. Senior citizen health insurance plan can help you save your funds from wiping off for hospitalization as well as be a solid tax-saving instrument (as per Section 80D of the Income Tax Act, 1961)
Let’s have a look at how senior citizen health insurance plan can play a vital role for tax benefits.
The premium paid by you for your parent’s health insurance policy delivers the below 2 profits:
- Insurance coverage
- Tax remunerations
Since we already know one side of the benefit of buying a senior citizen health insurance plan, we would now focus on the other side i.e. the tax benefits.
What is Income Tax Act - Section 80D?
As per the Income Tax Act - Section 80D, you can claim a tax deduction provided you are paying premium for yourself, spouse, children and parent’s health insurance policy. It doesn’t really matter if your parents are financially dependent upon you or not.
You can avail a maximum tax deduction of Rs. 25,000 a year for the premium paid for yourself, spouse or children. However, you can avail a maximum tax deduction of Rs. 30,000 if your parents are aged 60 or more and provided you are paying the premium on their behalf as per Section 80D.
Which means, if you are below 60 years and your parents are above 60 years, then you are eligible for a tax exemption of total Rs. 55,000 a year on paying health insurance premiums regularly for yourself and your senior citizen parents. However, if you are above 60 years as well as your parents are also above 60 years, then the maximum tax benefit that you can avail under Section 80D would be Rs. 60,000.
Let’s take an example.
Asha (30 years) paid a health insurance premium of Rs. 20,000 (family floater covering her spouse and one kid). Furthermore, he paid for his parents (both parents are senior-citizens) health insurance premium of Rs. 32,000 and also paid Rs. 5,000 for his father’s health check-up. So, now after spending a total of Rs. 57,000 on health insurance and health check-up, Asha would be eligible for a total tax deductions of Rs. 55,000, as per the Income Tax Act - Section 80D.
Let’s now see how we derived on this amount as per the Income Tax Act - Section 80D.
|Health care expenses (Rs.)||Premium paid (Rs.)||Deductions as per Section 80D (Rs.)||Tax deduction qualified (Rs.)|
|For Asha, her spouse & 1 kid||20,000||25,000||20,000|
|Health check-up for Parents||5,000||5,000||5,000|
Tax benefits under Section 80D
As per the Income Tax Act - Section 80D, you can claim deduction for the below:
- Mediclaim and critical illness policies meet the requirements for tax deduction under Section 80D of the Income tax Act.
- Premiums for health insurance policies and Central Government Health Scheme (CGHS) succeed for deductions.
- Premium for personal accident policies do not qualify.
- Payments for premium for health insurance policy can be made only for yourself, spouse, children and parents to be qualified for tax deduction. Payments made for siblings or independent children won’t be eligible for tax deduction.
- You can not avail the tax benefit if you make the premium payment through cash. The qualifier modes of payments can be any banking channels like cheque, credit or debit card, demand draft and net banking. However, the payments done for premiums of the preventive health check-up can be made in cash.
Documents required to avail tax benefit for senior citizen health insurance
You only require the policy copy along with the premium receipt to file the tax returns for the senior citizen health insurance policy. It is utmost important that the payment for the premium should have been made from your bank account and not in cash.
Knowing the benefits of the senior citizen health insurance plan as an instrument for saving tax, I would recommend you guys to give a thumps-up to opt for a senior citizen health insurance plan for your mom-dad.