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November 29, 2022

Itax Software

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Health Insurance and tax benefits under Sec 80D

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Taxation and evasion are the two facets of a single coin. Whenever there is a question of taxation, individuals often look to find ways to avoid paying their tax liability in any which way possible. Even the government has devised investments which are tax free and offer a rebate in your taxable income. There are various sections which specifically cater to particular investments like 80C, 80D, 80DD, 24(b), etc. For now, let us concentrate on the benefits available under section 80D.

What does section 80D cover?
Section 80D deals with the contributions made by individuals towards their health insurance premium. According to this section, any amount paid by an assessee (an individual who is liable to pay tax on his income) or a HUF (Hindu Undivided Family) towards mediclaim insurance for their family (self, spouse, children and parents in case of an individual) or their members (in case of a HUF) would be exempt from tax. This exemption is over and above the exemption granted under section 80C.
What are the conditions to avail exemption under the section?
The exemption can be claimed by an individual (resident or non-resident) or by a HUF.
The payment must be made by any mode other than cash. Cash payments do not qualify for exemption.
An individual can make contribution for his parents whether they are dependent on him or not.
What is the maximum amount of deduction?
The maximum amount that can be availed under section 80D is Rs. 40,000. However, a new sub limit of Rs. 5000 has been introduced under this section for preventive health check up for self, spouse, children and parents with effect from the financial year 2012-13. This introduction raises the maximum deductible amount to Rs. 45,000.
How is the total amount segregated?
The maximum amount available to an individual paying towards self, spouse and children is Rs. 15,000. A further Rs. 15000 is allowed if payment is made for parents. If the parents have attained 60 years or more, the amount increases to Rs. 20,000. If the assessee or any of his family is above 60 years, then the maximum allowable amount is Rs. 20,000 for self, spouse and children and another Rs. 20,000 for parents (given they are 60 or above).
Thus, many of us are unaware of the actual total benefit we can avail under section 80D in respect of our mediclaim insurance. We generally consider Rs. 15,000 for ourselves and an additional Rs. 20,000 in case of our parents, if covered. The additional amount of Rs. 5000 escapes our knowledge simply because it was introduced quite recently. So, sit up and take notice of your deductions, they may well save quite a considerable amount of your tax.
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