Understanding the process of claiming tax benefits for multi-year health insurance policies is essential for maximising your financial advantages. Claiming tax benefits for a multi-year health insurance policy works a bit differently than claiming benefits for an annual policy.
So let us will delve into the steps and considerations involved in claiming tax benefits for a multi-year health insurance policy, empowering you to make informed decisions and optimise your tax savings.
Siddharth Singhal, Business Head - Health Insurance, Policybazaar.com, said, "As per the Income Tax Act, Section 80D, individuals under the age of 60 can claim tax benefits of up to Rs 25,000 per financial year on premiums paid towards health insurance policies, while senior citizens can claim up to Rs 50,000 per financial year."
Singhal further said, "Multi-year health insurance policies, like annual policies, offer tax benefits on the premium amount paid. However, it should be noted that the tax deduction is done proportionately under a multi-year policy. For example, if a multi-year policy is purchased for a premium of Rs 54,000 for a duration of three years, a tax deduction of Rs 18,000 per financial year can be claimed for three consecutive years. This provision is an excellent opportunity for individuals to save on taxes while ensuring financial security in the event of medical emergencies."
Furthermore, multi-year policies also offer long-term policy discounts of up to 10% on opting for a two-year policy and up to 15% on choosing a three-year-long policy.
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Who can claim: Most health insurance companies will provide you with an 80D certificate specifying the claimable amount for each year. This certificate will be helpful while filing your tax return. Remember, premium payments must be made through digital channels (credit card, debit card, etc.) to be eligible for deductions.
"According to income tax rules, only the individual named as the proposer in an insurance policy is eligible to claim a deduction for the premiums paid. In the context of a multi-year health insurance policy covering two individuals, typically, one person is designated as the proposer, responsible for initiating and maintaining the insurance coverage. As a result, only the proposer is entitled to claim tax benefits for the premiums paid towards the policy under Section 80D," said Singhal.
Points to note