Each family has a certain amount of medical expenses that they have to incur regularly. This fixed expenditure could be towards the premiums of a health insurance policy, or related to some critical illness or disability of a family member. As per the provisions made by the Income Tax Act, 1961 there are certain tax saving investment options under Section 80D, 80DD and 80DDB that can contribute in reducing the tax burden by allowing tax deductions.
Read on for a better understand on how to utilize these sections for your most benefit.
Deduction for Health Plan Premiums under Section 80D
A Health policy is amongst the most beneficial tax saving investments as the amount paid towards a health insurance premium, is eligible for a deduction from the taxable income as per this Section.
For the individuals below the age of 65 years, the amount paid towards the premiums of a health insurance policy, subject to a maximum of Rs. 25,000, is available as a deduction from their taxable income. On the other hand, for the senior citizens, i.e. the people above 65 years of age, the health insurance premium up to a maximum of Rs. 20,000, are eligible for a deduction.
Further, a deduction up to a maximum of Rs. 20,000 (Rs. 25,000 in case either of the parents is a senior citizen) can also be claimed against the premiums paid for the health insurance policy for the taxpayer’s parents. This tax saving investment benefit is regardless of whether the tax payer’s parents are dependent on him or not. However, one cannot claim any deduction against the health insurance policy he has bought for his in-laws.
Scope of Deduction
An individual assesse can claim a deduction against the premiums he has paid towards this tax saving investment, i.e. a health insurance policy for self, children, parents, and spouse.
In case of HUF assesses, the amount paid towards the premiums of the health insurance policy of any of the members of the Hindu Undivided Family, can be claimed as a deduction.
Major Factors to Remember
- To the avail the benefits of this tax saving investment, the premiums of the policy shall not be paid in cash but any other mode.
- The premiums of the health insurance policy paid by you must be a part of the taxable income for which you are claiming the deduction. Also, the benefits of this tax saving investment cannot be availed if the premiums are paid from the gifts that you have received.
- The section allows you to make split payment of the premium. For instance, assume that your parents pay 50 per cent of the premiums of their health insurance policy and the balance 50 per cent is paid by you. In such scenarios, you can avail the benefit of deduction with respect to the share of amount paid by you. Alongside, your parents can also claim deduction benefits for the part of amount that they have paid.
Deduction for Expenses on Medical Handling of Handicapped Dependents under Section 80DD
In case you are paying for the medical treatment expenses of a dependent of yours who is a handicapped, then you can claim for a deduction equal to that amount as per the section 80DD of the Income Tax Act.
Lesser amongst Rs. 50,000, or the expenditure actually incurred. For the severely handicapped people, the limit goes up to Rs. 1,00,000 or the actual expenditure.
Scope of Deduction
The deduction under this section can be availed for parents who are dependent, children, siblings and spouse. The condition is that the dependents should not have already claimed for a deduction against their disability.
Deductions are allowable the following situations:
- a) Expenditure incurred on training, rehabilitation, or medical treatment of d the handicapped dependent. This includes the amount spent on nursing.
- b) Sum paid for a life insurance plans for the protection of the disabled dependent in event of your unfortunate demise.
Definition of Disability
Disability here means a condition of a person in which he suffers from 40 per cent and above of any disabilities mentioned below. Severe disability refers to a condition in which the person is suffering from 80 per cent or more of these disabilities.
- Mental retardation or illness
- Blindness and Vision problems
- Locomotor disability
- Hearing impairment
This content has been written by Finance gab team. We love to write about insurance and money saving tips for our audience and viewers.
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