4 Simple Steps To Understand Tax Benefit On A Mediclaim Policy

Mar 23, 2017

In response to our article: All You Wanted to Know About StarFirst Combi Plans; we received queries on the tax benefit an individual can claim on his/her health insurance premiums under section 80D of the Income- Tax Act, 1961. There seemed to be a lot of confusion on the exact amount that is permitted to be claimed under different scenarios. So, for the benefit of all, we decided to address the queries through today's article.

The Income Tax Act, 1961 suggests the maximum amount that can be deducted under section 80D in difference scenarios. Here's a snapshot:

Calculation of Tax Benefit Under Section 80D

To elucidate the above table, let us understand the fundamentals in different scenarios:

Section 80D Benefits for F.Y. 2016-17 (A.Y. 2017-18)

Some additional parameters to be kept in mind before claiming tax benefit under section 80D:

1. The mediclaim insurance premiums should be paid in the current financial year to claim tax benefits for it in the same year.
2. Avoid paying the mediclaim premiums in cash because you'll lose on the tax benefit. Preferably pay it through cheque, credit card, internet banking, etc.
3. The word "your family" includes-yourself, spouse, and dependent children. The maximum age of dependency for a male unemployed child is 25 years, and a female unemployed child is covered till her marriage. However, if your children (both male and female) are above 18 years of age and are employed, then they aren't considered as "dependents". It does not include your parents.
4. Your parents may or may not be dependents to claim tax benefit on the health insurance premium that you pay on their behalf.
5. If you are paying premiums for your "in-laws", however it cannot be claimed as tax benefit under section 80D. On the other hand, if your spouse pays the premiums for his/her parents, then he/she can claim a tax benefit on the premiums paid.
6. You can claim a tax benefit on mediclaim plans provided by your company too, if you are paying the premiums. However, the total tax benefit under section 80D would be as per the table above.
7. Preventive health check-up expenses can be claimed as tax deduction upto Rs 5,000. However, it is part of the above deductions and cannot exceed the total deductions allowed under section 80D.

To Conclude...

Remember, there is absolutely no reason to have insufficient mediclaim insurance. The costs you will incur on increasing medical expenses, as inflation continues and as you grow older, can be greatly reduced by the right and optimal insurance policy. And these savings can be channelized towards building a strong mutual fund portfolio that enables you to achieve your life goals faster. So, ensure to choose the right policy, and if you have any questions, on investing and insuring yourself optimally, don't hesitate to reach out to Certified Financial Guardian, who stands as a symbol of Trust and Respect.

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