Tax benefits for NRIs buying health insurance in India

Non-Resident Indians (NRIs) live abroad but they maintain their connection with India, both emotional and financial. NRIs often invest in assets in India or have an income source in their home country. Any form of income that NRIs earn in India might be subject to tax. NRIs are required to file their income tax returns in India even if the earned income is tax-free in nature. The income tax return can claim a deduction from the earned income but filing it becomes important if NRIs have an income source in India. 

When it comes to incomes earned in India, such an income can be taxable or non-taxable. If the income is taxable, NRIs incur a tax liability. However, there are avenues through which NRIs can claim tax exemption and reduce or nullify their tax liability. One such avenue is a health insurance plan.

NRIs and health insurance 

Thanks to the regulations issued by the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI), you can now buy a health insurance plan in India being an NRI. So, you being an NRI, can buy health insurance for yourself, your family and also your parents. 

Tax benefits on health insurance bought by NRIs

As an NRI, you can get the following tax benefits on a health insurance plan that you buy in India –

Health insurance plan bought for self and/or family

If you buy a health insurance plan for yourself and/or your family, you are eligible to claim a deduction on the amount of premium which you are paying. The deduction allowed is the amount of premium paid or Rs.25,000, whichever is lower. This deduction is allowed under Section 80D of the Income Tax Act, 1961. 

In case you are a senior citizen, i.e., aged 60 years or above, then the amount of the deduction limit increases to Rs.50,000. 

Some of the important points to remember are as follows –

1. You can insure your spouse and children under the plan
2. The deduction is available in the financial year in which you pay the premium 
3. If the premium exceeds Rs.25,000 or Rs.50,000, the income tax deduction would be upto the maximum limit applicable.
4. You would have to file your income tax return and claim a deduction on the amount of premium
5. You might have to submit proof of insurance to claim the deduction

Health insurance plan bought for parents 

If you buy a health insurance plan for your parents staying in India, then also you get an opportunity to claim a deduction on the amount of premium paid on their policy. This deduction is Rs.25,000 if your parents are below 60. If, however, they are senior citizens, the deduction increases to Rs.50,000. 

The important points about this deduction are as follows – 

1. This deduction is under Section 80D of the Income Tax Act, 1961.
2. The deduction is in addition to the deduction you can claim on the health insurance premium paid for your health insurance plan.

Aggregate tax benefit on health insurance

Since you are eligible to claim tax benefits on your health insurance policy and on the policy for your parents, you can claim dual tax benefits. Here’s how –

1. Deduction of up to Rs.25,000 on your policy + a deduction of up to Rs.25,000 on your parents’ policy assuming both you and your parents are below 60. The total maximum deduction amounts to Rs.50,000
2. Deduction of up to Rs.25,000 on your policy + a deduction of up to Rs.50,000 on your parents’ policy assuming that you are below 60 but your parents are senior citizens above 60. The total maximum deduction amounts to Rs.75,000
3. Deduction of up to Rs.50,000 on your policy + a deduction of up to Rs.50,000 on your parents’ policy assuming both you and your parents are senior citizens above 60. The total maximum deduction amounts to 1,00,000 rupees.

Thus, if you fall under the 30% bracket, you are eligible to claim a tax saving ranging from Rs. 15,000 to Rs.30,000 on your tax liability. 

However, if you only insure yourself or your parents, the tax savings would be calculated on a single premium and lower. 

So, besides offering comprehensive and affordable coverage, health insurance plans in India also offer tax benefits. So, if you need health coverage in India or your parents stay in India, buying a health insurance plan would be beneficial.