Section 80D - Twin treat of medical cover and tax rebate

Paying taxes is not only a responsible thing to do, but it also helps you get loans easily. However, paying a big amount in taxes is not a judicious call when you have the option to invest money to reduce your taxable income. While some long-term investment options help you save taxes under Section 80C of the Income Tax Act, section 80D is meant for the health insurance you buy. Let’s learn more about this section and see how a health plan offers tax benefits apart from keeping you financially secured during medical emergencies.

What is the investment criterion under Section 80D?

Section 80D of the Income Tax Act provides a tax rebate on buying health insurance. The premium of the health plan that you pay for yourself and your family members can help you reduce some part of your taxable income. It also includes the expenses made on preventive health check-ups and on buying other heath-based riders such as critical illness cover. You can get a health plan for your spouse, dependent children, and parents. The extent of tax deductions depends upon the age of the primary policyholder. Here’s what the rule says:

• If you pay insurance premiums for yourself, your spouse, and your children, you are eligible to claim a maximum tax deduction of INR 25,000 annually.

• In case you are a senior citizen, the limit is INR 50,000 a year.

• If you buy a health plan for your parents, you can claim a maximum tax benefit of INR 25,000 annually if your parents are less than the age of 60.

• If your parents are senior citizens, you can get a tax benefit up to INR 50,000 per year.

• An additional 80D income tax deduction of INR 5,000 can be availed for the expenses associated with health check-ups for the entire family.

Exclusions under section 80D:

• Payments for health insurance premiums for grandparents, siblings, or working children will not result in tax benefits.

• If health insurance premium payment is made through cash, you will not be eligible for a tax rebate. However, the payment for health check-ups can be done with cash payment to receive tax benefits.

• If your company makes a group health insurance premium payment on the employee’s behalf, the employee won’t be eligible for any tax exemption. However, if you choose to make extra premium payments to bump up your group cover, you can claim tax benefits on the additional amount.

So, how much can you save?

You can claim a tax deduction on the premium paid for yourself and your family members, but there is a limit depending upon the age of the policyholders.

• INR 30,000: For a policy bought for yourself or spouse or children or all, will give INR 25,000 tax deduction and an additional INR 5,000 for a health check-up.

• INR 55,000: The above criteria plus health insurance for parents below 60 will give INR 25,000 tax deduction.

• INR 80,000: For self, family, and senior citizen parents, will give INR 75,000 tax deduction and INR 5,000 on health check-up exemption.

• INR 1.05 lakh: The above criteria and an additional INR 25,000 if you are a senior citizen yourself.

Conclusion

The date to file your Income Tax Return is approaching and if you are looking for ways to save tax, don’t forget the tax benefits under 80D. While buying a health insurance is a great tax-saving measure, it, more importantly, shields your savings during medical emergencies.

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