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What is section 80D?

With the beginning of your career, comes the yearly routine of filing income tax returns. To lower income tax liability, one can invest in a host of tax-saving instruments. This is made possible by the various deductions and exemptions offered by the Income Tax Act. One such popular tax-saving instrument is Section 80.

Section 80 is designed for encouraging taxpayers to invest and save through certain plans and instruments. Under Section 80, one can avail numerous deductions that will lower their taxable income and thereby, their tax outgo.

How does tax-saving under Section 80D work?

Tax is deducted from the gross total income to arrive at the net taxable income.

Gross Total Income = Income from Salaries + Income from House Property + Business Income + Capital Gains + Income from other Sources.

Net Taxable Income = Gross Total Income – Deduction specified in Sections 80C to 80U of the Income Tax Act (which includes Section 80D and its sub-sections)

What does Section 80 include?

Section 80 includes a long list of deductions from Section 80C to Section 80U. Section 80C is the most popular section, as it contains the most number of instruments and offers a total deduction of Rs. 1.5 lakh. Another commonly used sub-section is Section 80D, which comes with its own set of tax-saving benefits and perks.

What is Section 80D of Income Tax Act?

Section 80D provides deductions on medical insurance for you and your family. If you have an insurance policy in your name, or in the name of your spouse and dependent children, you can claim a deduction of up to Rs.25,000 on the premiums paid towards this policy.

Section 80D benefits can be availed by both individual taxpayers and Hindu Undivided Families. The maximum deduction available to individuals is Rs.1,00,000 and to HUFs is Rs.50,000.

  • If either you or your spouse are senior citizens, the cap is raised to Rs.50,000.
  • A further deduction of Rs.25,000 is allowed on insurance for dependent parents, under 60 years of age, under Section 80D of Income Tax Act.
  • If either of the dependent parents are above 60 years of age, the cap on deductions is raised to Rs.50,000.
  • If parents are more than 80 years old i.e. super senior citizens and do not have health cover, deduction upto Rs.30,000 is allowed on medical expenses incurred for them.

Are deductions available on expenditure towards health check-ups?

The maximum amount deductible on preventive health check-ups under Section 80D is Rs.5000. Deductions can be claimed by an individual towards health check-up expenses for self, spouse, dependent children, and parents.

The deduction limit for preventive health check-ups comes within the overall health insurance premium limit. No cash payments except for health check-ups are deductible under Section 80D of the Income Tax Act.

What is the fine print of Section 80D?

  • Only health insurance plans specified by Central Government or approved by the IRDA (Insurance Regulatory and Development Authority) are eligible for deduction.
  • Except for health check-ups, payments have to be made through modes other than cash to be eligible.
  • Health insurance premiums for siblings, grandparents, uncles, aunts, or any other relatives are not eligible for deduction under this Section.
  • Premium paid for dependent children is eligible but that paid for working children is not eligible for tax deduction.
  • If both you and your parent pay the premium partly, both can claim deductions on the specific amount paid by each.
  • The deduction is applied on the amount of premium without Service Tax and Cess.
  • This deduction is not applicable on group health insurance schemes provided by employers.

Are health insurance plans with single premium deductible under Section 80D of Income Tax Act?

As per Budget 2018, a provision was made in Section 80D for health insurance plans with a single premium. These are basically policies in which you pay a one-time premium in lumpsum form, instead of regular premiums in instalments. As per the provision, tax benefit for lumpsum premium can be claimed proportionately over the policy term (number of years).

For example, a lumpsum premium of Rs.75,000 is paid for a three-year policy. You can claim a deduction of Rs.25,000 each for three years even though you have paid Rs.75,000 in the first year itself.

How to Maximize Tax Saving under Section 80?

The Income Tax Act, 1961, has many provisions that help you maximize your tax savings. Deductions and exemptions offered under the Income Tax Act can lower your taxable income, reducing your tax burden. Here’s a quick summary of how you can maximize your tax savings using the various tax saving investment options under Section 80C, 80CCC, 80CCD and 80D of the Income Tax Act:

1. Invest in instruments that qualify under sections 80C, 80CCC, and 80CCD(1)

Individuals and HUFs can claim a maximum deduction of ₹ 1,50,000 under these three sections, using investment options including the following:

  • Employee Provident Fund (EPF)
  • Equity-Linked Savings Scheme (ELSS)
  • National Savings Certificate (NSC)
  • Post office fixed deposit
  • Premium paid on life insurance
  • Public Provident Fund (PPF)
  • Sukanya Samriddhi Yojana
  • Tax-saving fixed deposits with a 5-year lock-in period
  • Unit-Linked Insurance Plan (ULIP)

In addition, Section 80CCC provides tax deductions for certain pension plans, while section 80CCD(1) covers investments in the National Pension System and the Atal Pension Yojana.

2. Avail additional deduction of ₹ 50,000 under section 80CCD(1B)

The Income Tax Act allows you to save taxes on amounts up to ₹ 50,000 for investments made in the National Pension System.

3. Invest in health insurance plan

One can avail tax saving benefits on the premiums paid towards a health insurance under Section 80D. These deductions can be availed on health insurance premiums paid for self, spouse, children, and parents. You can claim up to ₹ 25,000 for on health insurance for yourself, your spouse, and your children. On health insurance for your parents, who aren’t senior citizens, you can claim an additional ₹ 25,000 under section 80D, while for parents who fall under the senior citizens category, you can claim an additional ₹ 50,000.

Section 80D can come in very handy and help reduce your tax liability significantly. Other Sections of the Income Tax Act that offer income tax deductions, ranging from Section 80C to 80U, can also be used to decrease your income tax outgo. The Health First Plan by Canara HSBC Oriental Bank of Commerce Life Insurance offers the dual benefits of a protective cover as well as applicable tax benefits. In addition to this, one can avail several perks like coverage against 26 major critical illnesses, waiver of premiums, return of premiums and a monthly income benefit.

Frequently Asked Questions:

1. Does the limit of Rs. 1.5 lakhs mean that I can invest Rs. 1.5 lakhs in more than one instrument and claim benefits?

As per Section 80C taxpayers can avail a maximum deduction of Rs.1.5 lakh, which shall include all the investments made in tax-saving instruments.

2. Is term insurance premium included under 80C deduction?

Yes, premiums paid towards a term insurance plan qualify for deduction section 80C of the Income- tax Act, 1961.

3. Is deduction of Rs. 1.5 lakhs available under each Section 80C, 80CCC and 80CCD(1) separately ?

No, the total deduction amount in aggregate under sections 80C, 80CCC and 80CCD (1) cannot exceed Rs 1.5 lakhs.

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