The complete guide to saving tax under Section 80D

Let’s state a fact. As per the Central Board of Direct Taxes (CBDT), approximately 5.89 crore people filed their Income Tax Returns on the new e-filing portal as of 31st December 2021. Though the number, when compared to the total population of 1 billion people, seems minute, but if you look at the Indian tax structure, the income of a decent number doesn’t fall under the eligible category. However, for those filing taxes, the government has laid benefits as every tax paid enables them to function smoothly and provide the citizens with resources.

Hence, to avail of the advantages provided by the Indian government for making the right choice of investments and thereby saving considerably on taxable incomes, here is a complete guide of saving tax under Section 80D of the Income-tax Act, 1961 that comes packed with benefits.

Understanding Sec 80D

Section 80D allows taxpayers to avail tax deductions on the premiums paid towards health and medical insurance in a financial year. In short, it is a vital policy for your portfolio as it provides rebates as well as saves you and your family, i.e. self, spouse, parents and dependent children, from any unexpected expenses that may be incurred towards ill health. It is eligible for individuals and HUF, and claim varies with age. 

Criteria and Maximum deductions 

Section 80D permits a deduction of ?25,000 for self, spouse, and dependent children. However, for parents, it is dependent on their age. If they are 60 years or above, i.e. senior citizens, then the maximum tax break would be up to ?75,000; however, if their age is below 60 years, the highest deduction is up to ?50,000. Further, if the taxpayer, spouse and parents fall under the senior citizen’s classification, ?1,00,000 can be claimed as a full deduction.

Parents over 80 years 

In case you have parents of 80 years or above who don’t have any existing health insurance policy and may not be able to afford one due to high premiums based on pre-existing ailments, then Section 80D of the Income Tax Act comes to their rescue. A deduction can be claimed of up to ?50,000 yearly for medical check-ups and treatments provided they do not incur the expenses themselves.

Claim against Medical Expenses 

There is another criterion covered under Sec 80D, in case parents aged 60 and above are not covered under any health insurance policy. In this case, the eligible taxpayer can claim a deduction against medical bills on expenditure incurred of ?50,000.

Preventive Health Check-up under Section 80D

The government has been driving citizens towards being health conscious and working towards a better lifestyle. Taking this initiative forwards, in 2013-14, they implemented a preventative health check-up deduction that propelled people to decrease risk factors early by detecting ailments and seeing a doctor regularly. 

Thus, under Section 80D, individuals can claim deductions for preventative health check-ups of ?5,000. The amount can be claimed for themselves, their spouses, their dependent children, or their parents with a limit of ?25,000 for individuals and ?50,000 for senior citizens. In addition, cash payments for preventive health screenings are eligible for rebates.

No Tax Benefits on Cash Payment

It is important to know that only medical insurance premiums paid through non-cash modes are eligible for Section 80D deductions of the Incomes Tax Act. 

Additional 80D deduction

Another reason that makes this health insurance a must is because it entitles a tax deduction of ?5,000 against expenses associated with health check-ups of the entire family.

The exclusions 

There are a few reasons under which Section 80D will not be liable. These are the payment of health insurance premiums and medical expenditures in cash, expenses made on behalf of working children, siblings, grandparents or other relatives, and lastly, if the company is bearing the cost under group health insurance premium on behalf of the employee.

Section 80DD and Section 80DDB

Section 80DDcomes into the forefront for cost bornefor disabled and/or specified persons. A tax deduction can be claimed for the dependent spouse, children, parents, siblings of the policyholder.

The amount of restitution is subject to the severity of the disability. For instance, for at least 40% disabled, the claim on the deduction amount is ?75,000, while for 80% or more, it is ?1.25 lakh.

Section 80DDB, on the other hand, offers the benefit of the claim for the cost of treatment incurred on self or the dependent for specified illnesses such as cancers, chronic kidney diseases etc. Here, individuals below 60 years, whether self or dependent, get the maximum deduction of ?40,000 and those over 60 years and above can claim ?1 lakh. However, the list of diseases eligible for a claim is specified in the Income-tax Act.

To summarize, it is also vital to invest in a health insurance policy mainly because of its dual benefits of tax benefits and medical expense coverage. Hence, do your search online and opt for a policy that best suits your family and own needs. So, invest responsibly and smartly.

(By Amit Chhabra, Head-Health Insurance, Policybazaar.com)