Save Tax with section 80D - Health Insurance Tax benefits under section 80D

Posted on: Feb 4, 2021 | | Written by:

Save Tax with section 80D - Health Insurance Tax benefits under section 80D

Published on January 20, 2021 | Est Read Time: 3 min

None of us plans to fall sick or catch an ailment, but there is an immense possibility of one needing medical care at some point. Rising healthcare costs are a matter of concern, and the role of health insurance to cushion the financial impact of healthcare costs is vital. We look at ways to save the tax liability. Once you start earning, you must understand your tax liability, how much you have to pay, and how much you can save. Hence, understanding the tax exemptions offered by the government at the right time can help in saving for the future. Under Section 80D of the Income Tax Act, 1961, the government gives citizens the provision of tax exemption if they have applied for health insurance.

To promote and popularize health insurance, which is a significant cost-saver in case of health issues, there is a tax concession provided on the premium paid towards a health insurance policy by the government. Premium paid on health insurance is tax-deductible under section 80D of the Income Tax Act. Under this section, a tax deduction is provided towards health policy on individuals, spouses, and children. You can also include your parents in the policy to spread the insurance benefits and avail tax benefits. Buying health insurance for parents is useful as the medical costs are rising and with them aging they are prone to illnesses.

Features of Section 80 D -
• If you have paid a premium on yourself, your spouse, and a child in one financial year then you can claim up to Rs 25,000 in tax breaks. Besides, if you have paid an extra premium amount for your parents, you can claim an extra Rs 25,000 to Rs 30,000 in tax breaks, depending on the age of your parents. Meaning you are eligible for a maximum tax exemption of Rs 75,000 if you have medical insurance.

• In addition to the tax break, you can get by paying the health insurance premium, you can also avail tax exemptions under Section 80DD and Section 80DDB, for any expenses incurred by you for the medical treatment which includes nursing, training, as well as rehabilitation of dependents who are disabled.

• An additional amount of Rs 5,000 is exempted from the parent's annual health checkup.

• However, it is mandatory to get a medical certificate from a government hospital to claim the deduction.

• If the medical insurance premium is paid in cash then there is no 80d tax benefit. Also, the payment must be paid in a form of online bank transfers, cheques, or via debit or credit cards.

Let's understand the working of section 80D with an example:
For instance, a 40-year old is taking a health policy for himself, his two children, and spouse and paying Rs 17,000 as an annual premium towards health insurance and preventive health checkup for Rs 2,000. He can claim Rs 19,000 tax deduction under Section 80D. There are several types of medical insurance policies that one can choose from.

Conclusion:
The actual choice of medical policy and its combinations can help you develop formidable protection against complex medical expenses. The combination is also cost-effective if one opts for a smart mix. Section 80 D can reduce your tax liability considerably if you use it optimally. By investing smartly and making the most of the exemptions available to you, you can ensure that you don’t end up paying more Income Tax than you have to. While filing for your Income Tax Returns, submit proof for the sections that apply to you. All investments, premiums, expenditures, etc. if eligible, can be used to claim tax deductions.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.