=> Under Section 80D, a resident individual may claim a maximum tax deduction of Rs. 25000 per year for his or her health insurance premiums.
=> If you were applying for tax relief in proportion. You would receive a deduction of half the amount of the premium in both years.
If your health insurance renewal date drops soon. You can think about buying a multi-year health insurance plan by paying a single premium.
Because most insurance companies currently offer discounts. These policies will be fixed at the same rate for many years. Unless they exceed the age slab that benefits you and guarantees a change in insurance premiums.
But what happens if the single premium amount paid for multi-year insurance policy exceeds. The tax deduction limit applicable to under Section 80D for health insurance premiums? You can claim tax deductions proportionately over the policy term under the income-tax law.
Section 80D states that a resident individual may apply for a maximum of Rs. 25,000 tax deductions per year for medical premiums paid for himself, his spouse and children, and an additional Rs.25000(Twenty-five thousand) for premiums paid for parents. You can claim an additional deduction of up to Rs. 50000(Fifty-thousand) if the parents are senior citizens and you pay medical insurance premiums. It means taking the total deduction to Rs.75000 (Seventy-five thousand).
How to claim proportionally:
It may be useful to receive proportional claims over multiple years for single premium insurance. Suppose your health insurance premium is Rs.25000(Twenty-five thousand) in one year for a family of four (husband, wife and two kids), the premium for a two-year policy will be Rs.50000(Fifty thousand) (assuming that next year’s premium will not rise due to a shift in age slab). If the insurance company gives a 7.5% discount, you will pay a single premium of 46,250 for two-year coverage. Please note that if the premium is set to increase in the second year due to a change in age slab, the premium will be calculated accordingly.
If you claim the tax benefits in proportion, there is a deduction of half the premium or Rs.23125(Twenty-three thousand one hundred twenty-five) in both years. Insurance companies usually issue a certificate stating the amount that can be claimed as a deduction each year.
Another advantage is that your premium is fixed for two years, and even if the insurance company revises rates, you don’t have to pay anything additional.
The benefit is available only if the payment is made in any way, except in cash.