Dubai: Are you a UAE-based Non-resident Indian (NRI) looking to invest in a health insurance plan back home? If you are, you may have realised that it isn’t easy to decide what type of plan brings you the most tax-related savings.
“As an NRI, there are taxation norms you need to consider when buying health insurance in India. This is why many NRIs who migrate abroad often face hiccups on this before they return to India,” said Brijesh Meti, a UAE-based consultant who decodes tax norms for residents in India and abroad.
“It doesn’t matter if you are buying an insurance plan for yourself or for your parents, by purchasing health insurance in India, you automatically become eligible for tax deductions according to the prevailing Income Tax regulations.”
The added benefit being health insurance premiums in India are considerably lower than what you would pay in other countries. For instance, a family of four can get a cover of INR2 million (Dh98,967) by paying about INR70,000 (Dh3,463) to INR80,000 (Dh3,958) in premiums per year.
Is the coverage of Indian plans limited?
However, Masher Suleiman, a global tax planning associate based in Abu Dhabi, cautioned that most Indian health insurers only reimburse hospitalisation expenses incurred in India. “For instance, if you stay in Dubai and get hospitalised, your Indian health policy typically would not cover it,” he said.
“Some insurers do offer health policies with global cover, but not all global covers are designed the same. For instance, some only provide global health coverage in case of emergencies. Others only provide it in case of planned hospitalisation.”
In the latter case, you would need to take an Indian resident doctor’s approval as well, Suleiman added. “There could be other restrictions and exclusions, aside from the fact that health policies with global covers are also expensive.
“Some premium policies do cover life-threatening emergencies if they occur abroad, but even they require a high co-payment by the insured person. There are also policies that cover medical expenses incurred abroad if that treatment and required infrastructure do not exist in India.”
“Most health insurance policies have a clause that the policyholder should have to be an Indian resident to be able to claim outside India, so one should not spend more than six months outside India in a calendar year,” added Meti.
“However, if you are going abroad alone and your parents and/or children are staying back in India, then you can continue with the ‘family floater’ policy. (The policy will insure medical expenses in case your family members get hospitalised.)”
Know the tax savings for Indian insurance plans
When it comes to claiming tax benefits, an NRI can do so if he or she already pays taxes on income earned in India, explained Suleiman. "A resident or non-resident can claim a deduction of up to INR25,000 (Dh1,237) for premiums paid for health insurance for self, spouse and children.
“This includes up to INR5,000 (Dh247.42) for preventive health check-ups, under Section 80D of the Indian Income Tax Act. Section 80C also provides a tax deduction on the total income for savings in life insurance.
“Therefore, the annual premium for life insurance qualifies for the tax deduction for the NRIs. However, bear in mind that the maximum limit for the tax deduction under Section 80C is INR150,000 (Dh6,600).
“However, if the individual is a senior citizen (above 60 years of age), then he or she can claim a deduction of up to INR50,000 (Dh2,474.20) for premiums paid for health insurance for self, spouse and dependent children.”
“Almost all health insurance policies have geographical restrictions, which mandates that expenses incurred outside India will not be covered. This clause on geographical restrictions is buried in the fine print of the terms and conditions so you may not notice it when you apply for a policy.
“But it will render the policy useless if you are not in India. This is also why Indians going for studies abroad are encouraged to not rely on the health insurance plans bought in India but buy a policy in the destination country.”
Should repatriation plans affect insurance plans?
Buying health insurance in India makes sense if the NRI is returning to the home country or intends to do so in a couple of years, agreed Meti, Suleiman and Bagley, particularly when it comes to tax perks for those repatriating back home.
“It’s advisable to buy the insurance well in advance because most policies have a cooling period of 1-2 months before some illnesses are covered,” added Bagley. “That way you will not have to rush to buy health insurance immediately after landing in India.
“Also, if the NRI has a history of diabetes or a heart condition or there is a new born baby in the family, it’s cost effective to buy the insurance before you come to India. Certain pre-existing ailments such as diabetes and cardiac ailments are not covered by insurance for the first four years.
“For other ailments like ENT disorders, hernia and osteoporosis, the waiting period can be 1-2 years. There is also a 90-day waiting period for infants. So even though you’ll have to shell out a premium for 2-4 years without enjoying any benefit, it still works out cheaper than not buying insurance.”
Verdict: Should you buy health insurance in India?
The duration of stay is one of the important factors you will have to consider. If you are planning to stay overseas for a shorter duration, around three-four years, then it would be advantageous for you to buy a health policy in both countries, the experts reiterate.
“Do not stop paying premiums for your Indian health policy if you already have one. This way you can keep premiums lower and make claims, if needed, as soon as you return without having to go through a waiting period for pre-existing diseases (PEDs),” added Suleiman.
“On the other hand, if you have a long-term plan to stay abroad, then you don’t need to take health insurance in India. You are better off buying a policy in the country of your residence. For short trips to India, travel insurance is a cheaper way to get insured.”
It also makes eminent sense to buy medical insurance while traveling to India for holiday or business.” It might just be a 5-6 day trip, but don’t travel without medical insurance. General insurance companies now offer customised plans that can fit your pocket,” added Meti.
He further explained how for less than INR1,600 (Dh79.17) one can buy a cover for INR1.5 million (Dh74,225.88) to INR2 million (Dh98,967.84). “Do watch out for a co-payment clause when you buy such a plan,” Meti cautioned.
