Section 80D Deductions: How to Save Tax Under Section 80D

If you fall under any given tax bracket, paying tax is a necessity and the responsibility of every Indian citizen. The progressive taxation system is designed in a way to put the least tax burden on lower-income groups. However, the Indian government and the Income Tax (IT) department are aware of the reduction in purchasing power faced by people after paying their taxes. In an attempt to redistribute the tax benefits to citizens, the IT department developed section 80D. This section of the IT act makes a slew of provisions for tax-saving opportunities for Indian citizens. In this article, we will take a look at the various tax deductions under 80D, and how you can save tax under 80D.

How to save tax under section 80D.

Section 80D of the IT act focuses on tax returns and exemptions you can claim if you purchase a health insurance policy.

In today’s day and age, purchasing health insurance is considered to be a necessity by most. However, the caveat with investing in health insurance is that it offers you long term returns exclusively. In the event of an illness or medical emergency, you will be able to fund your treatment and healthcare from your health insurance cover, reducing the financial burden from your shoulders.

Under section 80D however, you can aim to get back some returns from your investment in health insurance. As part of the 80D savings, you can claim tax benefits of upto 25,000 rupees per annum on the health insurance premium payments you make. Additionally, there is a maximum cap set on tax returns that can be claimed, at 1 lakh. There exist a number of bands under this limit.

The specifications of tax savings under Section 80D are as follows:

1. 1. If you buy health insurance for yourself, you can claim a deduction upto Rs.25,000.
2. 2. On family health insurance or separate policies for your spouse and children, you can save another Rs.25,000.
3. 3. If your parents are less than 60 years old, you can again save Rs.25,000 of tax on health insurance policies bought for them.
4. 4. For parents above the age of 60, health insurance policy benefits are increased to Rs.50,000.
5. 5. If you are above the age of 60 and buy health insurance policies for yourself and your parents, the total deduction you can claim is raised to Rs.1,00,00.

In addition to being able to claim tax benefits on your individual or family health insurance premium payments, you can also claim deductions under 80D for healthcare checkups.

Tips to Maximise Savings

If both you and your spouse are earning an income, then you and your spouse can claim a combined benefit of up to 2 lakhs if you meet the highest band, and upwards of one lakh if you fall under the lower bands, by purchasing health insurance for your spouse's parents as well. This way, the net tax deductibles under section 80D for the entire family increases, allowing you to increase your ability to save tax under 80D.

Conclusion:

Health insurance is a long-term investment that offers high long-term payoffs, ensuring you have the funds required to pay your medical bills in the event of a medical emergency. Health insurance policies need customers to pay a regular premium to keep their policy going. This premium is also necessary to avail the cover, and becomes a considerable expense for policyholders. Tax deductions under Sec 80D aim to help ease the financial burden of these premium payments, and allow you to increase your net return on your investment. You can save tax under 80D as much as 25,000 rupees per month per health insurance policy, with a maximum tax-deductible limit of 1 lakh per individual.