Couples Can Split Health Insurance Premium for Tax Benefit

Having a health plan is necessary to safeguard against unplanned health emergencies. 

Couples can do this and also save tax by splitting the health insurance premium. Split insurance premium is a great way to save tax, and the policies can be chosen as per requirements. It helps reduce premiums and is one of the best health insurance policies.

Health insurance premiums paid by the employee are deducted from the taxable income, whereas those paid by the spouse or as a family are not taxed. By splitting the premium, one spouse can claim a deduction for the premiums paid by him/her.

Procedure:

Both the spouses should understand health insurance policies and benefits to choose the most suitable plan for their needs.

Group Health Insurance:

Employee deposits the health insurance premium into the employee's account. Employee claims a deduction for his contribution while filing income tax, while the employer pays the entire premium for the family. The employer deposits the premium into the employee's account. The employee pays the premium from his/her account for himself and his family. Employee claims a deduction for his contribution while filing income tax.

Individual Health Insurance:

Employee takes out an individual health policy in his name. He can claim a deduction for his contribution while filing income tax, whereas the employer pays the entire premium for him and his family. Employee's contribution is taxed in his hands, while that of the employer goes tax-free.

Family Floater Health Insurance:

Employee and spouse take Rs 5 lakh for each individual health policy. The employee pays the entire premium of Rs 10 lakh into his account, whereas the employer pays the entire premium for the family. Employee claims a deduction for his contribution while filing income tax, whereas the employer pays the entire premium for the family.

Benefits:

Split health insurance premium can help save tax. The employer's contribution towards the health insurance premium is not taxable. In contrast, the contribution made by the employee towards individual health insurance is tax-free only if certain conditions are met.

Splitting health insurance premium helps a couple save tax up to Rs 25,000 in a financial year.

It is essential to inform your employer about the split in premium, else one of the spouses might pay a higher premium, depending on the employer's contribution.

How to Pay Premium if it is Split Between Spouses?

The health insurance premium is automatically deducted from the policyholder’s account. If this is not possible, an affidavit can be issued to the employer mentioning that the spouse is covered under the policy and that he/she has consented to deduct the premium amount from his/her salary.

Documents Required to Claim Tax Benefits

• A letter from the employer to confirm that the employee is paying premiums, and he/she has consented to deduct the premium payment from the salary.
• An affidavit from the spouse bearing consent to deduct the premium amount from his/her salary.
• A copy of the policy document, including the declarations page.

What is the Tax Deduction Limit in Different Scenarios?

If a couple has only one health insurance policy, the husband should be named the proposer and a major. The proposer pays the first premium, which can then be split between the couple. Under Section 80C, a deduction of upto Rs 1 lakh is allowed for a premium paid on health insurance of self, spouse, and children. If there are two policies, the same concept applies, i.e., the person whose name appears first in the policy should be named the proposer, and the other, the nominee.

Can Only Proposer Claim Tax Relief?

As per income tax rules, only the person named the proposer in an insurance policy can claim a deduction for premiums paid under Section 80C. 

However, the person who makes all premium payments can claim tax deduction under Section 80D for preventive health checkups, even if he/ she is not the proposer.

You are not required to have two proposals for taking an insurance policy with multiple beneficiaries. Under this, all family members can get insured. In such policies, the proposer must make the first premium payment, which can be split between them.

Can You Have Two Proposers in a Single Policy?

Only one person can be the proposer in a single policy, which has to be the husband. The second proposal in such an insurance policy has to be the wife.

How to File Tax Using this Option?

The tax can be claimed under Section 80D for health insurance premiums. However, the deduction is allowed only when the sum of all deductions does not exceed Rs 1 lakh. If the deductions exceed Rs 1 lakh, they will be taxed 20%.

The deduction under Section 80D is available only if the family's total income does not exceed Rs 50 lakh.

Section 80D governs tax benefits for health insurance premiums. It states that a deduction of Rs 25,000 is allowed for health insurance premiums. This deduction can be claimed if the total income does not exceed Rs 50,000 and is applicable to both, individual, and family health insurance policies. This deduction is allowed for the taxpayer, spouse, and dependent children. Having a health plan is necessary to safeguard for unplanned health emergencies, buy it now from Niva Bupa health insurance.