5 Situations When You Could Lose Tax Benefits On Your Health Insurance
You may be aware that tax benefits can be claimed under Section 80D of the Income Tax Act, 1961. The deduction can be claimed on premium paid for self, spouse, children and parents. Now, did you know that in certain cases you could possibly lose the tax benefits on your policies? Here are the situations when you will not be able to enjoy the tax benefits on your health insurance policy.
Failing to renew the policy
To claim tax benefits, your health insurance policy needs to be active. Often times, people wait until they receive a renewal notice from their health insurer to pay the premium. Now, insurance companies are not under any obligation to send reminders, hence they cannot be held responsible if you fail to make the payment by the due date. It is thus essential for you to remember your policy renewal date and renew it on time. Or else you stand to lose your tax benefits.
Paying premium in cash
You can pay your health insurance premiums in cash. However, it must be noted that you will be eligible for tax benefits under Section 80D for premiums paid in any mode other than cash. However, cash payment for preventive health check up is eligible for tax benefits under section 80D.
Not submitting proof to employer
At the start of the financial year, your employer will ask to fill an investment declaration form that shows the proposed insurance premium and investments. Generally companies ask for submission of this form along with the proofs during the January to February period. Now, if you fail to submit the 80D certificate provided by your insurance company, your employer will re-estimate the tax for the remaining months and deduct a slightly higher TDS for the coming months. To avoid facing any hassles later, keep your form and investment proofs ready beforehand.
Making premium payments in one go for policies of longer term
Quite a few health insurance companies now offer long-term policies where policyholders can pay premiums for two years in one go. In exchange, insurance companies may ask for lower premium amount. In case of such long-term policies, you will only be able to claim tax deductions for the year you pay the premium. You will not get tax benefits in the second year.
Paying premiums for relations other than spouse, children or parents
Certain health insurance plans may allow you to pay premiums for insuring grandparents, siblings etc. While this is permitted, tax deduction cannot be claimed for this. Under Section 80D, you can get deduction only for premiums paid towards self, spouse, children and parents.
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