How to get Tax deduction under 80D?

  • Income Tax

Introduction

Tax exemption1 is a provision that has existed for years and basically provides means by which people can invest and spend money in order to reduce their total taxable income. Understanding the details of income tax returns and the related laws is important in order to lay out tax saving plans.

The Income Tax Act of 1961, which covers tax regulations and any changes made to them annually, consists of different sections that each address a certain group of expenses and the respective tax exemption provisions for them. This act has put into place a tax relief measure under section 80D which specifically addresses medical expenses and health insurance, how they can be claimed as expenses and the extent of tax relief applicable.

Tax deductions1 under section 80D:

According to section 80D, you are allowed to reduce your overall taxable income via payment of health insurance premiums.

  • As an individual, you are allowed to claim a tax deduction1 of up to Rs. 25,000, including health check-up expenses, for which the cap is Rs. 5000.
  • If the total expenses include your own as well as your spouse’s, children’s and parents’, you can claim up to Rs. 50,000 as income tax deduction1.
  • Additionally, according to a recent amendment, medical expenses incurred during treatment of senior citizens (above the age of 60) do qualify for tax deduction1; these expenses include diagnostic tests, medicines and doctor’s fees. Therefore, if your parents qualify as senior citizens, the total allowance can go up to Rs 75,000 for you and your family, including your senior citizen parents.
  • In case you yourself and your parents are all senior citizens or, the cap will be raised to Rs 1 lakh. In case the senior citizen’s spouse is also a senior citizen, then tax deductions1 are allowed on total medical expenses incurred for both of them. If the taxpayer is a senior citizen, there is a condition that the individual must not be already covered by a health insurance policy.

The following are the important components within Section 80D:

1. Health Insurance:

Medical emergencies may occur unexpectedly and treatment can be extremely expensive. Given the rate of medical inflation, the blow dealt to your finances could be very serious. Purchasing health insurance provides a safety net for such events, and in return for this protection, we pay a premium on a regular basis. Under section 80D, you are allowed a deduction of up to Rs.25,000 annually on the total premium amount paid towards the policy for that year.

2. Deduction on preventive healthcare check-ups:

Regular health check-ups to ensure that your vitals are all steady and prevent any potential health issues or diseases are extremely essential. Out of the aforementioned Rs.25,000 tax deduction1 that you can claim, Rs.5000 can be allocated to preventive health check-up expenses- your own as well as those of your spouse, children and parents.

3. Deductions on Health Insurance Premium Paid For Parents:

When you are paying a premium for health insurance policies that cover your parents, an important matter to address is the tax deduction provision for the same that you can avail. The tax deduction1on their policy’s premium can go up to a maximum of Rs. 25,000 if your parents do not qualify as senior citizens ie: are younger than 60 years old. However, if they are senior citizens, the maximum amount that can be claimed is Rs.50,000

Conclusion:

It’s crucial to factor in age, number of dependents, and personal health before planning your health or medical expenses in order to minimize them and get the most out of the tax relief provisions available. Assess different health insurance plans before making a decision; you can opt for a health insurance plan offered by Aditya Birla Sun Life Insurance Company and customize the cover according to your preferences.

1Tax benefits are subject to changes in tax laws. Please consult your financial advisor for more details.

ADV/3/20-21/2492

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