Our elderly parents or senior citizens can age gracefully with the aid of senior citizen health insurance. Ageing brings with it several health issues that need long-term therapy or treatment, and if not addressed promptly, can result in hospitalization. Furthermore, rising medical costs and the resulting escalating treatment expenses might throw your finances off and wipe away your life savings once you retire.
Tax Benefits of buying health insurance for your elderly parents
You can enjoy double benefits from a single payment when you buy a health insurance plan for yourself, your spouse, dependent children, or your parents. It gives you crucial financial protection, coupled with a wide range of benefits on coverage. Apart from this, it also lets you enjoy substantial income tax benefits under section 80D, of the Income Tax Act, 1961. You can enjoy these benefits on the premium you pay for health insurance.
You could be self-employed or salaried and still enjoy these income tax deductions on the premium you pay. When you buy senior citizen health insurance for your parents, make sure you get full coverage for all probable medical conditions instead of focussing on just higher tax benefits.
As per domestic law, section 80D of the Income Tax Act says that you can claim tax deductions on the premium you pay for a health insurance policy purchased for self, family, dependent children, and parents. The upper limit for this is Rs. 25,000, extendable up to Rs. 50,000 if your parents are senior citizens. This has been applicable w..e.f 1 April 2018. This simply means that if you buy senior citizen health insurance, you can get up to Rs. 75,000 on your taxable income.
If the age of both the proposer and his parents is above 60 years, he can get a tax deduction of up to Rs. 1,00,000.
Different situations indicating eligibility and deduction for saving tax on buying health insurance for parents:
- Proposer and parents both are below 60 years: In this scenario, you can get a deduction of up to Rs. 25,000 for self, family, and dependent children. You can get an additional Rs.25,000 claims for premiums you pay towards the health insurance of your parents. Thus, the total amount would be Rs. 50,000.
- Proposer, family, and children below 60, and parents above 60: Here, you can get a deduction of up to Rs. 25,000 for self, family, and children. For parents, you can enjoy a deduction of up to Rs. 50,000. This makes your total tax deductions Rs. 75,000.
- Proposer, family, and parents are above 60: You can claim a deduction of up to Rs. 50,000 on the premium paid for self and family. You are entitled to an additional claim of up to Rs. 50,000 on premium paid for parents. Total tax deductions here would be Rs. 1,00,000.
- Hindu Undivided Family (HUF): Benefits of up to Rs. 25,000 for self, family, and dependent children. Rs. 25,000 for the premium you pay towards your parents’ insurance. The total deduction amount here is Rs. 25,000 since tax benefits for parents are available only if they are senior citizens.
- Non-resident Individual (NRI): Up to Rs. 25,000 claim on premium paid for self, family, and children. Premium paid on health insurance for parents is tax-deductible only if parents are senior citizens. Hence, the total amount would be Rs. 25,000.
Income tax exemptions for senior citizens
If your parents are senior citizens, which means their age is between 60-80 years, you can get the following tax exemptions under section 80D, on the premium you pay on their senior citizen health insurance:
- Up to Rs. 50,000 as deduction claim on premium paid on health insurance annually.
- Rs. 1,00,000 for medical treatment of a critical illness of the senior citizen.
- Let’s say, your father is super-aged (above 80 years) and does not have health insurance and your mother is a senior citizen. Here, you can claim a tax deduction of up to Rs. 50,000.
Tax saving on preventive medical health checkup
The government has been trying to encourage citizens to be more proactive towards their health. For this, it introduced preventive medical health checkups in 2013-14. Under this scheme, you can even avail of tax-saving benefits on preventive medical health checkups. Preventive health checkups help in the early identification of a probable illness, mitigating the risk factors early on. You can claim a maximum of Rs. 5,000 as deductions under preventive health checkup deductions. These deductions are a part of the overall limit of Rs. 25,000 / Rs. 50, 000, as applicable. As with health insurance tax benefits, you can get this benefit not only for yourself, but also for your spouse, dependent children, and parents.
Buying a senior citizen medical insurance coverage provides a number of advantages to you and your parents. These may be, higher medical coverage at a senior age, cashless treatment, lifetime treatment care for parents, and considerable tax deductions for you. Thus, overall, it is a win-win situation for you in every way.