Section 80 D is my new friend

Posted on: Mar 2, 2021 | | Written by:

Section 80 D is my new friend

We all are finding various means and tricks to save money. One major trick is by understanding the various exemption guidelines that are prescribed by the government. Often, we are unaware of these benefits and we end up paying more income tax than required. Hence, it’s important to read the Income Tax India law Act of 1961 to understand the exclusions. Common exclusion is Section 80C which is used extensively, but we forget Section 80D.

What is Section 80D?

We all know health is wealth and to safeguard our wealth from any medical emergency it is vital to have a health insurance policy. In today’s time where medical expenses are increasing at an alarming rate, purchasing a comprehensive health insurance plan is a must. By purchasing health insurance plan you are not only safeguarding your future but also saving money in the present. Now how is that possible? Under Section 80D of the Income Tax Act, 1961, the government gives citizens the provision of a tax exemption if they have applied for health insurance.

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 tax benefit. Also, the payment must be paid in a form of online bank transfers, cheques, or via debit or credit cards.

For better understanding of section 80 D here is an example:

You are 61 years old and are paying a premium for yourself and your dependents of Rs 32,000. You are also paying for your parent’s health insurance policy who are 85 years old then under Income Tax section 80D you can avail the following benefits:

Health insurance tax benefit of Rs 30,000 on the premium of Rs 32,000 that you paid for your dependants and you.
Additional tax benefit of Rs 30,000 for senior citizen parents apart from the payment of Rs 35,000 made.

Therefore a total expense of Rs 60,000 can be claimed and not the total expense incurred.

Difference between Section 80 C and Section 80 D

Under section 80 D, you can avail an exemption for health insurance premiums of individual, family, and parents, also for any expenses incurred in preventive health checkups. You can save up to Rs 75,000 under this section. Section 80 C provides a deduction from total income in various investments, expenditures, and payments. The total deduction under this section is limited to Rs. 1.50 lacs.

Final word:

Taxes are part and parcel of adult life. 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. 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. Invest wisely!

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