In the last year’s budget - Finance Minister Arun Jaitley proposed more tax benefits under Section 80Dof the Income Tax Act towards payment of medical insurance or medi claim premium.
Currently, an individual can claim a tax deduction of up to Rs. 25,000 a year for the medical insurance premiums paid for self, spouse and children. He or she can also claim an additional Rs. 25,000 for premium paid for parents. If parents are senior citizens, the deduction limit goes up to Rs. 30,000.
My advice to you will be to consider opting for multi-year health insurance policies, as you will be able to capitalize on the discount amount and it can also enable you to get more tax benefits as well.
Let us look at two important points to consider before opting for multi-year health insurance.
Lock-in of the premium amount
One of the major benefits of opting for a multi-year health insurance plan is that your benefits accrue over a longer period of time and you don’t have to renew your insurance policy every year. This also means that they will have to pay lesser premium for a multi-year health plan and you will be able to attain the tax benefits for several years in a row.
Tax Benefits on Premium
Health insurers typically provide some discount if you pay premium for a few years upfront. But earlier, an individual could claim deduction only up to Rs. 25,000. Under the proposed changes in budget, in case of single premium health insurance policies having cover of more than one year, deduction will be allowed on a proportionate basis for the number of years for which health insurance cover is provided, subject to the specified limit.
For example, your insurer is offering a 10% discount on health insurance premium, if you pay Rs. 40,000 for the two-year cover. Under the proposed changes, the individual can claim Rs. 20,000 in both years. Proportionate deduction in different years for premium paid for the insurance will also benefit taxpayers as it will allow them twin benefit of discount and deduction in the same year which could have been lost if the total premium exceeds the prescribed limit
Therefore this year, financial and insurance planning - I will recommend you to consider a multi-year health insurance plan, as the benefits will extend beyond providing insurance for your health.
- Rahul Jain, Head, Personal Wealth Advisory, Edelweiss