The government of India through its Income Tax (IT) Act provides for various provisions to lower your tax liability and invest in tax saving instruments in the financial or insurance market. Sections 80C and 80D income tax reductions are the most common of them. These benefits of tax deductions can be enjoyed by any individual or Hindu Undivided Family (HUF) irrespective of their residential status.

What is Section 80D?

This section is an important provision in the IT Act that facilitates in reducing your tax burden up to Rs.25000 for family members and an additional saving of Rs. 25,000/50,000 for parents. The saving amount is only allowed with related medical insurance premiums (MIPs). In today’s day and age, health insurance premiums can be an extra burden on the income of salaried individuals, so this provision offers them an extra elbow room for their expenses. The tax exemption is also applicable to the premiums paid for multi-year health plans in a single year.

The insurance plans that are permissible under this section must be either from General Insurance Corporation of India (GIC) or any other insurer approved by IRDA. Moreover, it is permitted on contributions to any Central Government Health Scheme or such other scheme as approved by the Central Government (applicable only to individual).

However, there are three caveats in this regard:
  1. Mode of payment must be otherwise than in cash
  2. The amount must be paid out of taxable income
  3. Not applicable for group health insurance premiums paid by your employers

Section 80D Income Tax Exemption Limit

1. The amount of Rs 25,000 can be claimed as a deduction in a fiscal year for payment of medical insurance premium of self, spouse, and dependent children. If either you or spouse is a senior citizen, then the limit goes up to Rs 50,000.

2. Rs 50,000 can be saved with the premium paid for your parents if they are senior citizens (above the age of sixty) or not.

3. If the earning member is also a senior citizen. The total amount then increases to Rs. 1,00,000 (50,000 + 50,000) i.e. both for self and parents.

4. Preventive health check-up exemption of Rs. 5000 is also allowed till the time total permissible deduction amount, as mentioned above, is not exceeded.

Members Covered Tax Exemption Limit (Rs) Preventive Health Check Up (Rs) Total Deduction permissible (Rs)
Self, Spouse and Dependent Children 25000 5000 25000
Self, Spouse (either is a senior citizen) 50000 5000 50000
Senior Citizen parents 50000 5000 50000
Self, Spouse, Dependent children, Senior Citizen Parents 25000 + 50000 5000 75000
Self (Senior Citizen), Spouse, Dependent Children, Senior Citizen Parents 50000 + 50000 5000 100000

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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