How To Claim A Tax Rebate On A 3-Year Health Plan?

Posted on: Feb 20, 2024 | 3 mins | Written by: HDFC ERGO Team

How To Claim A Tax Rebate On A 3-Year Health Plan?

Claiming Tax Rebates on 3-Year Health Insurance Plans

We all know that health insurance is a substantial investment that can safeguard our finances during medical emergencies. However, one thing that holds us back from investing in health insurance is the policy premium. It is important to understand that health insurance premiums are quite affordable compared to the exorbitant hospital bills during medical emergencies. Moreover, medical insurance premiums are tax deductible; you can avail of tax deductions of up to INR 25,000 or INR 50,000 (senior citizens) on the premiums you pay toward your health plan. These deductions apply to single-year as well as multi-year policies. If you have a 3-year or multi-year health plan, read on to understand how tax rebates will be calculated on the same.

How is a tax rebate calculated for a 3-year health insurance policy?

Under Section 80D of the Income Tax Act, you can claim annual tax deductions of up to INR 25,000 or INR 50,000 (senior citizens) on the premiums you have paid toward your health insurance policy. So, when it comes to a tax rebate on a 3-year health insurance policy, here’s how it is calculated:

Suppose you are below 60, and the consolidated premium of your 3-year health insurance policy is INR 30,000 (INR 10,000 annually). The tax rebate for a multi-year health insurance policy is calculated proportionately for each year. Since the consolidated premium is what you pay for a 3-year health insurance policy, you can claim a tax rebate of INR 10,000 every year.

Benefits of choosing a multi-year health plan

A multi-year health insurance policy offers the following benefits to policyholders —

1. No yearly renewal

A multi-year health insurance policy saves you from the hassles of renewing the policy every year. All you must do is pay the premium for the entire policy term at once, and the policy will stay active for the stated tenure.

2. No premium hike

Many insurance companies hike policy premiums every year. However, when you buy a 3-year or multi-year health insurance policy, you will pay the premium for the entire policy term in one go. This will save you from worrying about paying increased premiums every time you renew your health plan.

Important points to keep in mind about tax benefits on multi-year health insurance policies

If you have a 3-year or multi-year health insurance policy, make sure you keep the following points in mind:

• Suppose the premium of your 3-year health insurance policy is INR 90,000. In this case, the annual premium will be INR 30,000. If you are below 60 years of age, you can claim a maximum tax rebate of INR 25,000 only. However, as a senior citizen, you can claim tax deductions on health insurance premiums for up to INR 50,000 annually.

• To claim tax deductions, you must pay health insurance premiums through your bank. This simply means that you can choose internet banking, cheque, demand draft, or any other mode of payment other than cash. Cash payments are not eligible for tax deductions.

• You can claim tax deductions on health insurance premiums paid for yourself, your family and your dependent parents. Here’s how it works:

Policyholders	Maximum tax rebate allowed on health insurance premiums	Total Deduction
Self and family (all below 60 years)	INR 25,000	INR 25,000
Self, family and parents (all below 60 years of age)	INR 25,000 (self and family) + INR 25,000 (parents)	INR 50,000
Self and family (below 60 years) and parents (senior citizens)	INR 25,000 (self and family) + INR 50,000 (parents)	INR 75,000
Self, family and parents (all are senior citizens)	INR 50,000 (self and family) + INR 50,000 (parents)	INR 1,00,000

• If you have paid health insurance premiums for your parents-in-law, you cannot claim tax deductions on the same.

• If your children are employed or independent and you pay their health insurance premiums, you cannot claim a tax rebate on the same.

• Health insurance premiums paid for siblings, grandparents, uncles, aunties or other relatives are not eligible for tax deductions.

Conclusion

To sum up, a 3-year or multi-year health insurance policy offers the same coverage as a single-year health plan. The only difference is that you won’t have to renew the policy every year. Also, the policy premiums will be locked at the time of policy purchase for the stated tenure. Therefore, you will not have to worry about premium hikes either. Moreover, medical insurance premiums are tax deductible, so you can claim deductions every year on the premium you have paid toward your health insurance policy. All in all, a multi-year plan is a good option for health insurance buyers.

FAQs

1. What is a 3-year health insurance plan?

A 3-year health insurance plan is a policy where premiums are paid upfront for three years. Many insurance providers offer discounts or incentives for multi-year health plans, so investing in one can help you save on premiums. Additionally, the premium remains fixed for the entire policy duration of three years, so you won’t have to worry about potential premium hikes during those three years.

2. Can I claim a tax rebate on a 3-year health insurance policy?

Yes, you can claim a tax rebate on your three-year health plan every year. For example, if the total policy premium for three years is INR 45,000, you can claim a rebate of INR 15,000 each year.

3. How much tax deduction can I claim on a 3-year health plan under Section 80D?

Under Section 80D of the Income Tax Act, you can claim a maximum deduction of INR 25,000 every financial year. If you are above 60 years, you can claim a tax rebate of up to INR 50,000 per year.

4. How do I claim a tax rebate on my 3-year health plan?

To claim a tax rebate on your 3-year health insurance policy, you need to do the following:

● When you are filing your income tax returns, declare the premium amount you have paid for your health insurance policy.

● Keep the receipts or proof of premium payments to support your claim.

Even if you have paid for the entire three years upfront, you will need to claim the tax benefit for each year individually, as it is due.

5. Do I need to submit the premium receipts and other documents to the income tax department?

You do not need to submit the premium receipts and other documents when you initially file your income tax returns. You must only declare the premium amount paid for the health insurance policy in your tax returns. However, it is important to keep all receipts and documents safe, as the Income Tax Department may ask for them if they want to verify your claim.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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