Although you can make premium payments in cash for your health insurance policies, you will however, not be able to avail tax benefits on it as the income tax rules disallow tax deductions on premiums paid via the cash mode. It is thus recommended that you choose to pay premiums through cheque, internet banking, draft or credit card to enjoy the tax advantage on premium. Cash payments for preventive health check-ups are eligible for tax deduction under Section 80D.
To claim tax deduction under Section 80C, make sure that the premium paid during the financial year does not exceed 10% of the sum assured. If it crosses this figure, it should be noted that the benefits you can claim will be limited up to 10% of the sum assured. In case of Section 10(10D), tax exemption is subject to premium not surpassing 10% of the sum assured.
Tax deductions under Section 80C and Section 80D can be claimed only for those years that you have paid the premiums. In case you have opted for a single premium life insurance policy, you can only claim tax benefits under Section 80C once - which will be the year you pay the premiums.
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