You already know that your health insurance policies can save you from the heavy expenses of hospitalization and other health issues when they occur. However, did you also know that they can provide you with tax benefits, too?
Yes, you read that right. Under Section 80D of the Income Tax Act, citizens of India can earn a tax rebate just by having a health insurance policy.
That is why, when the season for income tax filing begins in India, people try to get investment plans that can save them money on their taxes. This is where a good health insurance policy comes to the rescue.
However, there are certain situations when an insured person won’t get those tax benefits. We tell you all about them here.
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5 Situations That Can Cause You to Lose Tax Benefits
1. Missing Premiums—Even One
It is essential to pay the premiums on your health insurance policy on time and get it renewed regularly. Generally, people only remember to pay their premiums when they get a notice of renewal from their insurance company. However, insurers have no responsibility to send you a notice, although most do send it out of courtesy. All the same, you cannot hold them responsible for not sending you a reminder.
2. Paying the Premium for a Multi-Year Policy All at Once
It is possible to buy a policy that will be valid for two to three years. However, the premium amount of such insurance policies increases every year. Therefore, in place of paying and renewing your policy every year, you can opt to pay for a health insurance policy in advance. However, tax deductions under section 80D are only applicable for the year in which you make a payment. Therefore, you’ll be disqualified from earning tax benefits for the subsequent years.
3. Paying a Health Insurance Payment for Relatives Other Than Your Permitted Relations
There are insurance policies that offer health insurance coverage for relatives like siblings, grandparents, in-laws, and other relatives. However, any health insurance policy that is for a relative other than dependent parents, spouse, dependent children, and yourself will not be eligible for tax benefits. According to Income Tax Act section 80D, you earn tax benefits on the premiums you pay for health insurance policies for only the following:
- Dependent parents
- Dependent children
4. Failing to Submit Proof of Health Insurance Payments to Your Employer
Your employer asks you to declare your investments at the starting of every financial year. For this reason, employers send out an “Investment Declaration” form to every employee. Using that form, you can declare your insurance premiums and other investments for tax purposes.
Generally, these forms are circulated during January and February, and this is when you should provide the premium-paid certificate from your insurer. Most of the time, you can download this certificate from your insurer’s website. Or ask your broker for it. However, if you fail to give this certificate to your employer, you will lose out on some or all of your tax benefits for the year.
5. Paying Premium in Cash
According to Section 80D of Income Tax Act, you earn tax benefits only on those premiums that you pay in mediums other than cash. Therefore, if you have paid any of your health insurance policy’s premiums in cash, you will not earn the applicable tax benefits.
Your Health Insurance Policies Protect More Than Your Health
Your health insurance policies work as a shield to protect you in terms of health-related issues. Moreover, your health insurance policies also work to provide you with tax benefits.
That’s why you should consider your tax liabilities in light of the premiums you pay on your health insurance policy. In this way, you can maximize your tax benefits. Therefore, read your health insurance policy documents carefully and talk to your insurer if you have any doubts.
These issues are all the more important to owners of small businesses. Your health is critical to your success as a businessperson, of course. That’s why you keep your health insurance policies current. But any savings you can manage to acquire in the form of tax benefits are also important for both you and your business. So you have yet another reason to manage your health insurance policies properly.
You can compare various health insurance policies online at Policybazaar and easily select the most suitable health insurance for you and your loved ones.