Regardless of the tax bracket, it is required of every Indian citizen to make a contribution to the government through the payment of taxes. The structure of the progressive taxation system ensures that those with lower incomes will shoulder a proportionately smaller share of the overall tax burden. After paying their taxes, however, many find that they have less money available to spend, which is a problem that the Indian government and the department of Income Tax (IT) are well aware of. Section 80D was conceived of by the income tax department as a means of redistributing the tax benefits to the general public. This particular clause of the IT act creates a number of different alternatives for Indian citizens to reduce their overall tax burden. In this post, we will discuss the numerous tax deductions that are available under Section 80D, as well as the ways in which you can reduce your tax liability by utilising Section 80D.
How to reduce your tax liability by using section 80D
In the Income Tax Act, Section 80D addresses the tax returns and exemptions that are available to taxpayers who have purchased health insurance policies.
In this day and age, the majority of people believe that getting health insurance is something that must be done. Investing in health insurance does not offer any rewards in the short term because those returns are only available over the long run. In the event that you become ill or experience a medical emergency, your health insurance coverage will enable you to receive treatment and healthcare funded by the insurance company, relieving you of some of the financial load that would otherwise fall on your shoulders.
You can, on the other hand, try to obtain some of the money you invested in health insurance back according to Section 80D of the tax code. You are eligible to receive tax benefits equivalent to up to Rs. 25,000 per year based on the premium payments that you make for your health insurance policy if you file your taxes using the 80D deduction. In addition, the amount of money that can be received as a tax refund is limited to one lakh (Indian rupees). Under this restriction, there are a few different bands to choose from.
The following is a rundown of the criteria for claiming tax breaks under Section 80D:
- You are eligible to take a tax deduction of up to Rs.25,000 if you purchase health insurance for yourself.
- You can save an additional Rs. 25,000 by purchasing health insurance for your family or by purchasing individual policies for your spouse and children.
- You can save further Rs. 25,000 in tax on health insurance coverage that you buy for your parents if they are younger than 60 years old.
- The benefits of the health insurance policy are raised to Rs. 50,000 for parents who are older than 60 years old.
- If you are older than 60 years old and purchase health insurance coverage for both yourself and your parents, the total deduction that you are eligible to claim increases to Rs.1,000,000.
In addition to being able to claim tax benefits on the payments you make toward your individual or family health insurance premiums, you can also claim deductions for healthcare checkups under section 80D of the Internal Revenue Code.
Ways to Get the Most Out of Your Money
If you and your spouse are both working and bringing in an income, you may be eligible for a combined benefit of up to 2 lakhs if you fall into the highest band or up to 1 lakh if you fall into one of the lower bands if you buy health insurance for your spouse’s parents as well. This is only the case if you meet the criteria for the highest band. In this approach, the net tax deductions that can be claimed under section 80D for the whole family go up, which means that you have a greater opportunity to reduce your tax liability using section 80D.
Conclusion:
In the event of a medical emergency, having health insurance serves as a guarantee that you will have the financial resources necessary to pay your medical expenditures. Health insurance is a long-term investment that gives substantial long-term payoffs. Customers who have health insurance must make consistent premium payments in order for their policies to remain active. Policyholders are required to pay this premium in order to obtain the protection, which results in a substantial additional price for them. The purpose of the tax deductions available to you under Section 80D is to make the financial burden of these premium payments more manageable and to give you the opportunity to increase the net return on your investment. Under Section 80D, you have the opportunity to reduce your taxable income by up to Rs. 25,000 per month for each health insurance policy you maintain, with a maximum tax-deductible limit of 1 lakh for each individual.