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Income Tax Act 80D

Introduction

Income Tax Act 80D presents a unique opportunity for healthcare.

Indeed, the health and welfare of citizens is the primary goal of any government.

All developed countries like the USA, Australia, etc. have an advanced healthcare system where  government pay  mainly for their  check-ups

Undoubtedly, public spending on health is drastically high in these countries.

On the other hand, the scenario is largely different in India where government spending on health care is quite low on a per capita basis and people have to spend from their pockets for healthcare.

Therefore it's better to have a health insurance policy in our country to safeguard against risks. To get the best insurance plan as per your needs, click here to request a free advisory callback.

Moreover, in order to encourage the citizens who spend on health insurance to safeguard themselves against risk, the government provides a deduction of the amount spent on premium and preventive health check-ups, that is, Income Tax Act 80D.

Under this section, you can claim the premium amount paid on your health insurance policy and even the expenditure on preventive health check-ups.

Income Tax Act 80D - Rules and regulations

Section 80D is covered under chapter VI –A of the income tax act which primarily deals with deductions for various expenditures and investments.

In addition to that, it can also help you to save tax on your senior citizen parent's medical bills, click here to see how.

You might thus be thinking about whether this deduction is available for health insurance premium paid for self only?

For an answer to this question, you need to know the eligibility under the aforesaid section.

Income Tax Act 80D

 

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Eligibility under Income Tax Act 80D

1. Firstly, a resident individual can avail the deduction against the premium paid for health insurance services for below family members.

  • Self
  • Spouse
  • Children
  • Parents

2. Secondly, a Hindu undivided family can also claim tax deduction under this section.

The deduction, in this case, will only be provided if the premium payments are towards the medical insurance of HUF members only.

Deduction limit for Income Tax Act 80D

a. Medical insurance for individuals(covering self, spouse, and children)

The maximum permissible deduction limit for an individual is Rs. 25,000 every financial year on the premium for health insurance for self and family.

Moreover, this limit has been enhancing up to Rs. 50,000 in the case of senior citizens.

b. Medical insurance for parents

Further, if you are taking health insurance for your parents also, you will subsequently be getting the extra benefit of Rs. 25,000.

If your parents are senior citizens, then consequently the permissible deduction is  Rs. 50,000 per fiscal year.

c. Preventive health checkup

Deduction of preventive health checkups is also provided up to Rs. 50,000 but it is inclusive of the above deduction limit.

Income Tax Act 80D

KEY POINTS TO REMEMBER:

1. Firstly, the deduction is provided if actual expenditure on insurance premium and health checkup is incurred.

2. Secondly, the deduction cannot exceed the permissible limit stated even if the expenditure is higher.

3. Thirdly, if the actual expenditure on premium and health checkups is actually low, then the deduction will be provided only to the extent of actual expenditure.

4. Finally, no deduction for the health insurance premium of dependent children.

Let's understand Income Tax Act 80D with examples

Let's show me different scenarios related to 80D Income Tax deductions.

Example 1

For example, you are 52 years old. You have paid Rs. 18,000 as a health insurance premium and Rs. 4,000 as a preventive health checkup.
In this case, you will get Rs. 22,000 as a deduction under the aforesaid section.

Example 2

Suppose you are 52 years old. You have paid Rs. 22,000 as a health insurance premium and Rs. 4,000 as a preventive health checkup.
Though the total expenditure is Rs. 26,000 the deduction amount is capped at Rs. 25,000 only. You should also note that the deduction of Rs. 25,000 is inclusive of preventive health checkups.

Example 3

For example, you are 26 years old. You have paid Rs. 18,000 as a health insurance premium and Rs. 4,000 as a preventive health checkup. Your parents are 58 years old. You have bought health insurance for them and paying a premium of Rs. 20,000.
In this case, you will subsequently get Rs. 42,000 as deduction under the aforesaid section though the maximum permissible deduction is Rs. 50,000.
You may thus note that the deduction cannot exceed the actual expenditure.

Income Tax Act 80D

Example 4

In case you are 26 years old. You have thus paid Rs.18,000 as a health insurance premium and Rs.5000 as a preventive health checkup.

Your parents are 58 years old.

You have subsequently bought health insurance for them and paying a premium of Rs.30,000.

In this case, the total permissible deduction is thus Rs.50,000.

Though the total expenditure exceeds the limit you can claim only Rs.50,000 as a deduction.

Example 5

Suppose you are 26 years old. You have subsequently paid Rs.18,000 as a health insurance premium and Rs.7000 as a preventive health checkup.

Your parents are 62  years old. You have subsequently bought health insurance for them and paying a premium of Rs.30,000.
The total permissible deduction is 75,000(25000 + 50,000) but you will get Rs.55,000 as a deduction. (Deduction cannot exceed the actual expenditure).

Example 6

For instance, you are 28 years old. You have subsequently paid Rs.35,000 as a health insurance premium and Rs.10,000 consequently as a preventive health checkup.

Your parents are 68 years old.

You have thus bought health insurance for them and paying a premium of Rs.40,000.
In this case, you will get Rs.75,000(age of parents exceed 60 years) as a deduction under the aforesaid section even though the expenditure is above Rs.75,000.

Example 7

In case you are 61 years old. You have subsequently paid Rs. 35,000 as a health insurance premium and Rs.10,000 as a preventive health checkup.

Your parents are 88 years old.

You have bought health insurance for them and paying a premium of Rs.60,000.

As the age of both parents and individual exceed 60 years, the maximum permissible deduction is thus Rs.100,000.

In this case, you will subsequently get Rs.100,000 as a deduction under the aforesaid section even though the actual expenditure exceeds it.

Conclusion

This section provides a comfortable scope for reducing your tax liability largely by investing in health insurance.

Therefore, I will suggest you buy an insurance policy as it is best for your physical and financial health.

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