How to Claim Tax Benefits on Multi-Year Medical Insurance Plans?

A health insurance plan can provide many benefits. Tax advantages are available along with medical coverage. According to current tax regulations, you can claim a tax deduction for health insurance premiums by claiming Section 80D of Income Tax Act 1961. You can claim these deductions each year, when filing your ITR or Income Tax Return. This process is slightly different for plans that cover multiple years. Uninitiated people may not realize that these plans are valid for a number of years. There is no need to renew or pay for the plan each year. It can also be that the annual tax deduction is done in a different way. Here’s how.

How do tax benefits work with multi-year health insurance plans?

We need to first understand the tax benefits. We will then look at the tax benefits that can be obtained with long-term health insurance.

If you are younger than 60, the premiums paid each year for health insurance can be claimed as a tax deduction up to Rs 25,000. You can also claim Rs 50,000 if you’ve taken out a policy to cover parents over 60. **
The premiums for several years are consolidated into a single payment. The amount of the premium is higher than that of regular annual premiums.
In such a case, according to the current laws, the tax benefit is determined proportionally for each year depending on the length of the insurance policy. **
If, for example, you have paid premiums for a 2-year multi-year insurance policy and the premiums are still outstanding, your tax deduction will be 50% for each of those years.

To better understand, let’s take an example: Assume you bought a 3-year multi-year insurance plan. You paid a lump-sum of Rs 60,000 to cover the whole tenure. You can now claim Rs 20,000 as a tax deduction for each of the three years. You can claim Rs 20,000 for the first year, then Rs 20,000 for the second, and finally Rs 20,000 for the third.

Tax Benefits for Multi-Year Health Insurance

You may now have a good idea about how to claim Medical Insurance Tax Exemption . You should keep in mind the following things when you follow the process.

Tax deductions for a multi-year plan in health insurance are limited to Rs 25,000 or Rs 50,000, depending on your age. If your premiums for a four-year plan are Rs 1,20,000 then the maximum tax deduction that you can claim is Rs 25,000, not Rs 30,000. The maximum deduction is Rs 25,000 if you are under 60. **
The majority of insurance companies issue a certificate 80D to policyholders who have a multi-year insurance plan. This document states the maximum amount that can be claimed for the entire year.
Some insurance plans cover the parents-in law as well. Premiums paid to cover their coverage might not qualify as tax deductions.
The premium must be paid by any other payment method than cash to be eligible for the tax deduction.
Only taxpayers who opt for the old regime are eligible to claim deductions under Section 80D. There are no deductions available under the new regime of Chapter VI A. **

Benefits of Multiyear Health Insurance Plans

You can also enjoy a number of other benefits with a multiyear contract. Health Insurance Plan along with tax advantages:

No need to renew

You don’t have to renew your plan each year with a multi-year policy. You only need to pay the premium one time and your plan will be valid for several years.

– Locked premium

You can avoid premium increases by paying for several years in advance. If a premium hike is due, in most cases it will only take effect at renewal. *

– Discounts

Many insurance companies offer discounts on multi-year policies. You may be able to reduce your insurance premiums by purchasing a multi-year plan. You can use this calculator to get an estimate of your premiums and see how you can reduce the cost. Calculator for health insurance premiums . Opting for a multiyear health insurance plan is beneficial in many different ways. Paying a low premium for several years in advance can give you peace of mind, and even provide tax benefits.