Things to Know About Section 80D of the Income Tax

Tax planning is always challenging. Figuring out how to save on income tax can get complicated. Various laws allow for a deduction in the income tax amount.

Medical emergencies and bills are unexpected expenditures that can put your financial plans on hold. At unforeseen times like these, it helps to have health insurance that can cover such expenses.

However, most people do not invest in health insurance. This way, they bear substantial medical costs that do not align with their financial goals. To prevent this from happening, the government of India introduced Section 80D.

Section 80D of the Income Tax Act allows for tax deductions on medical insurance. With this, you can be prepared for those unexpected medical bills and save on income tax. Let us look closely at some things you need about the section.

Type of investment under SEC 80D

When planning for taxes, knowing the types of investments that allow for deductions is essential. Section 80D has been specifically created to cover expenses incurred for your health.

You can claim benefits under Section 80D if you have medical insurance and are paying the premium.

Section 80D of the Income Tax also allows for deductions in the case of critical illness plans or top-up health plans.

Eligibility of Deduction Under 80D of Income Tax Act

Exemptions offered by Section 80D can be claimed by individuals and the Hindu United Family (HUF).

If you have a health insurance policy, you can claim a tax deduction for:

1. Money spent on insurance premiums for yourself
2. Money spent on insurance premiums for your family

These deductions are separate from those you can claim under Section 80C of the Income Tax. You can claim an exemption with the help of both of these sections.

Deductions under Section 80D

Only when you pay for medical insurance premiums can you claim the tax benefits offered by Section 80D. Deductions under the section are classified based on age.

The following are the deductions allowed under this section:

• You, above the age of 60 years + Parents, above the age of 60 years- If the premium paid for both is Rs. 25,000 each, you can get an exemption of Rs.50,000.
• You and your family, below 60, and your parents, above 60, can get a deduction of Rs. 75,000 if the premium paid for you and your family is Rs. 25,000, and for your parents, it is Rs. 50,000.
• You and your family, above the age of 60, plus your parents above the age of 60, can get a deduction of Rs. 1 lakh if Rs. 50,000 is paid toward the premiums of all parties individually.
• Non-resident Individuals: If you have paid Rs. 25,000 for yourself, your family, and your children and Rs. 25,000 for your parents, you can get a deduction of Rs. 25,000.
• Hindu Undivided Family (HUF): If Rs. 25,000 has been paid for yourself, your family, your children, and your parents, you can get a deduction of Rs. 25,000.
• Generally, people over 80 are not eligible for health insurance. In this case, you can claim tax benefits without any medical insurance. Any money spent on their treatment can be deducted under Section 80D. You can claim deductions of Rs. 80,000. 

Exclusions

When tax planning, it is important to take note of the exclusions under Section 80D. Even though you might have medical insurance, you cannot claim benefits under this section if:

• The insurance premium was paid in cash. However, you may pay for other medical expenses with cash and still avail yourself of tax benefits.
• The insurance premium was paid for siblings, grandparents, working children, or other family members. You can only claim benefits under Section 80D if the premium was paid for yourself, your spouse, your non-working children, and your parents.
• Your company paid for group health insurance on your behalf.

Maximum limit

You can claim deductions under Section 80D on medical insurance premiums and health check-ups. While it is important to remember the exclusions under the section, it is equally important to take note of the maximum limit of deductions you can avail. The maximum limit on these deductions is as follows:

• You can claim a maximum benefit of Rs. 25,000 for yourself and your family. For health check-ups, Rs. 5,000 is the maximum deduction.
• For yourself, your family, and your parents, the exemption limit for medical insurance premiums is Rs. 25,000 for yourself and your family and Rs. 25,000 for your parents. Whereas, the limit for health check-ups is Rs. 5,000.
• For yourself, your family, and your parents above 60, you can claim a maximum of Rs. 25,000 for yourself and your family’s insurance premium. You can claim a maximum of Rs. 50,000 for insurance premiums for your parents. A total exemption of Rs. 5,000 is given for health check-ups.
• For (above the age of 60) yourself, your family, and your parents above 60, the exemption limit for medical insurance is Rs. 50,000 for yourself and your family. For your parents, too, the limit is Rs. 50,000. The overall exemption for health check-ups is Rs. 5,000. 

The bottom line

Careful financial planning is a necessary step. But medical emergencies may come when you least expect them to. Medical bills are often a huge expenditure.

 It is financially wise to get medical insurance for you and your family. With insurance, you can plan well ahead of time.

Section 80D of the Income Tax Act can help reduce your burden. You can claim deductions on your health insurance premium and for health check-ups.

Reading more about Section 80D is essential to make the most of this.

The points mentioned here helped you gain clarity about Section 80D. Tax planning can be tricky, but you can count on reliable sources like Piramal Finance to help you through the process. 

With expert financial advisors, you can rest assured. Make sure you check out their free credit report tool. If you want to learn more about finance, you can browse their articles and blogs.