Nowadays, you can buy a policy having a valid period of two to three years wherein your premium amount will increase subsequently.
Health insurance policy can help you save tax as per Section 80D of the Income Tax Act. The upper limit of this deduction is Rs 25,000 for individuals and Rs 50,000 for senior citizens. But, due to lack of awareness of the fine print on provisions of tax law, there are certain situations when even after buying a health insurance policy you will not be able to enjoy tax benefits:
Here are five scenarios where you'll not be eligible for tax deduction even after you have purchased Health Insurance:
Paying premium for the multi-year policy
Multi-year policies are in vogue. You can buy a policy having a valid period of two to three years wherein your premium amount will increase subsequently. Instead of renewing policy every year, you will get the option to pay for your health Insurance for many-year in advance. Now, the tax deduction in 80D works for the year in which you have made the payment. “If you have paid the premium (over and above the limit of Rs 25000) in the previous year in advance for this year’s policy tenure then you'll not get any tax deduction,” said Animesh Das, Head - Product Strategy, ACKO.
Paying premium for other than permitted relationships
The tax deduction is only allowed for the health policy taken for self, spouse, dependent children and parents. Hence the portion of the premium paid for any person apart from these relationships will not be eligible for tax deduction.
O N Singh, Chairman, Universal Sompo General Insurance, said there are several health insurance plans which allow health insurance coverage for relationships like siblings, grandparents, grandchildren, in-laws etc., please note as an individual taxpayer you can claim tax deduction for health insurance premium paid for self, spouse, dependent children and parents under section 80D. “In case of Hindu Undivided Family the tax deduction can be availed for the premium paid towards medical insurance for a HUF member only,” he added.
Not submitting proof of premium payment
At the beginning of every financial year, the employer asks for an “investment declaration” from employees to declare the proposed insurance premium and qualifying investments for tax purposes, the tax liability is estimated considering the declaration made. However, even if you have not declared health premium in beginning on the years but by the submitting the proofs at the end of the financial year before 31st March you can easily get the tax benefit. “If you fail to submit insurance and investment proofs you would lose tax benefits on your health Insurance policy,” said O.N Singh.
Paying premium for financially independent children
The most important fact is that when your children become independent and start earning then parents should not buy a health policy on their behalf as it will be treated as a mere expense in your financial savings. if you pay health insurance premium for a son/daughter who is not financially dependent on you, then in such situation you will not be able to claim a tax deduction on your health insurance under section 80D,” said O.N Singh.
Not renewing the policy on timeMost of the health insurance policy have a tenure of one year after which, you need to renew it to avail the benefit of tax savings in the next particular financial year and so on and so forth. Hence, failing to keep your policy active, you will not be able to claim the tax benefit in the consecutive financial years to come.