It’s no secret that tax is one thing everybody wants to pay as less as possible off or not pay at all. In this regard, section 80C of the Income Tax Act of 1961, gives taxpayers the option to claim deductions on contributions made towards provident fund, the premium paid towards life insurance and many others. The main purpose of these deductions is to lower taxable income and subsequently lower the amount of taxes payable. Yet, many of us are not aware of the various subsections under which deductions can be claimed.

Section 80C is the go-to section when it comes to claiming deductions for the tax benefit, but a commonly ignored section is section 80D while it allows you to claim a deduction on the premium paid on health insurance policies.

Let’s try to understand what is Section 80D

The government of India has provided individuals with the benefit of claiming premiums paid towards health insurance to encourage people to get medically covered. The benefit can only be claimed when the premium is paid during the financial year in question and the insurance can cover yourself, spouse, children, and parents.

However, this section does not allow benefits on premiums paid towards health insurance of your brother or sister. Only spouse, dependent children (below 18 years of age), parents and self are covered.

Benefits under the scheme

Under section 80D, the following are the benefits that you can claim:

  • The amount paid as premium on health insurance for yourself, your spouse and your children (under the age of 18 years), the maximum deduction you can claim is Rs. 25,000.
  • The amount paid as premium on health insurance for your parents, the maximum deduction you can claim is Rs. 25,000.

Additionally, if you or your parents are 60 years or older, then the maximum deduction will go up to Rs. 50,000 in both the above cases. Within the above limits, the amount of Rs. 5,000 towards yearly health check-up is also included.

Let us look at some cases below to understand just how deductions can be claimed under Section 80D of the Income Tax Act of 1961:

Case 1:

Mr. X pays Rs. 20,000 as a yearly health insurance premium for himself, his spouse and his two children. He also pays a premium towards his parent’s health insurance of Rs. 30,000, both of whom are under 60 years of age.

The total deduction available for Mr. X under Section 80 D is Rs. 45,000 which is Rs. 20,000 for the premium paid towards his family’s health insurance and the maximum deduction of Rs. 25,000 for the premium paid towards his parent’s health insurance

Case 2:

Mr. Y pays Rs. 40,000 as a yearly health insurance premium for himself, his spouse and his two children. He also pays a premium towards his parent’s health insurance of Rs. 70,000, both of whom are above 60 years of age.

The total deduction available for Mr. Y under Section 80 D is Rs. 75,000 which is the maximum deduction of Rs. 25,000 for the premium paid towards his family’s health insurance and the maximum deduction of Rs. 50,000 for the premium paid towards his parent’s health insurance

Health Insurance is an important financial product that should be bought, and the benefit of tax deduction provides us with more incentive. The key takeaway is to purchase health insurance for you, your family and your parents and stay protected while saving tax!

Bottomline

When claiming tax deduction under Section 80D, it is recommended to not chase the upper limit claim blindly. It is advisable to get an assessment of the health insurance that you really need and take adequate cover.

Happy Investing!