How To Save Tax: Know all about 80D Deductions

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Introduction 

When the pandemic hit China, many Indians thought COVID19 was restricted to other international boundaries. But, to their utter surprise, India was taken into the catastrophic tornado and ended up taking the lives of countless souls. As government hospitals provide COVID support treatment in a feasible or free. But, private hospitals demanded an expensive deal that was hard for many to pay in one go. 

And, having health insurance doesn’t guarantee perks like death, survival, or maturity benefit. A cluster of benefits also accompanies it, and tax benefits are one of the many accompanying perks. You have Section 80D, 80C, 80DD, and other tax laws under the Income Tax Act, 1961. 

Note: Before jumping into the depth of the tax world, you should be aware of the fact that individuals can continue to use the old/current tax regime in FY 2020-21 by making use of existing deductions and tax exemptions. 

This blog will help you learn about, 

  • What is Income Tax Return (ITR)?
  • What is Section 80D of the Income Tax Act?
  • How to save tax on salary in India?
  • What are the deductions under Section 80D?

Tax is a tough language to understand but not impossible. And we are here to make this complex world more digestible and easy to understand because it is necessary to understand specific terms and laws to leverage certain benefits and be responsible citizens.

About Income Tax Return (ITR)

Income tax return (ITR) can be defined as a legal form that an earning individual uses to report their income and taxes to the Income Tax Department. Their income determines an individual’s tax liability. As you file the income tax return and highlight that one has paid excess tax for the year, the individual is eligible for an income tax refund from the tax department.

According to income tax legislation, an individual or organization that generates any income during a fiscal year is required to file a return annually. The revenue can be accounted for – wage, business profits, entrepreneur activities, income from real estate, capital gains, and other revenue generation sources.

One can either opt for offline mode or online to fill out this form. Also, one must file their ITR within the given deadline because the taxpayer has to face a penalty if it lapses. 

If one’s income exceeds the statutory exempted amount, they are liable to file an income tax return. The rate of income taxation is predetermined for taxpayers. As said earlier, the taxpayer shall incur certain penalty charges over delay in filing the income tax return, which will reduce one’s opportunity to obtain a loan or a visa for a trip.

Filing your income tax return is crucial if you fall under any of the below-mentioned reasons, and they are:

  • If you are an established organization, you ought to file the ITR even if you reap profits or experience economic jitters in the fiscal year.
  • If a loss under a particular category of revenue must be carried forward
  • If a taxpayer wishes to get a refund for paying extra taxes for the financial year.
  • If you are an Indian and own property or a financial interest in any enterprise that is based abroad.
  • If an individual receives income from property held in trust for charitable or religious activities, a political group, a research association, a media organization, an educational or healthcare entity, a trade union, a hospital, and other divisions of organization or body.
  • If a non-resident Indian (NRI) extracts their income through the sources situated in Indian land, they are accountable to be taxed in Indian norms, and ITR for the same should be filed. 
  • If an individual is applying for a visa or loan.

About Section 80D of Income Tax Act 

This blog section shall guide you in getting free from the definition of basic terms/jargon from the tax world.

An Income Tax Act (1961) permits qualifying taxpayers to exclude the total premium paid for health insurance during the fiscal year. It is offered on regular health insurance premiums and top-up and critical illness premiums. Section 80D deductions are available for dividends paid to purchase health insurance for your spouse, dependent children, and parents.

If you are standing beneath this perk, one can obtain insurance for themselves, better half/spouse, parents, and children.

Note: Tax deductions are not available to any other entity such as an organization.

Medical Insurance is the only life insurance policy that supports tax deduction under Section 80D. One must consider the following factors to avail of tax deductions via medical insurance. They are as follows:

  • If you are making health insurance premiums for your sibling and non-immediate family (parents and spouse), you cannot enjoy deduction over tax purposes. 
  • If you and your parents vouch for a joint payment cycle, you can both claim a deduction for the amount paid by each of you.
  • While the deduction process is to be carried out, it should happen without showing the cess from the premium amount and service tax.
  • If an individual’s organization offers them group health insurance, it is not considered part of tax deduction under Section 80D of the ITA.
  • The company’s given group health insurance premium is not deductible.
  • If the premiums paid by any method other than cash are deductible.

List of Deduction under Section 80D 

The following is the list of factors eligible for tax deductions under Section 80D of the Income Tax Act, 1961. And the list of deductions are as follows:

If the taxpayer has invested in life insurance and pays a premium of Rs. 50,000 for premiums for themselves or parents, who are aged below 60, then they are eligible for tax deduction under the respective Section of the ITA. 

On the other hand, if you purchase life insurance and pay a premium amount of Rs. 25,000 for yourself, spouse, or parents (aged over 60), as a responsible premium payer, you are eligible to avail a deduction of Rs. 75,000.

Now, if we change the premium amount to Rs. 50,000 and keep the above-mentioned scenario, then it comes with a deduction of INR 100,000 as mentioned under Section 80D of the Income Tax Act.

Tax-deduction for preventive healthcare checkups: It is always advised that one must get a thorough body checkup to check whether they are keeping fine or not. In such spending, the user is eligible for a tax deduction of Rs 25,000, as prescribed in Section 80 of the income tax act (ITA). 

Donation to the Central Government’s health scheme or any other scheme announced by the government

These were some of the tax-saving options in India as per Section 80D of the Income Tax Act, 1961. Paying tax isn’t a harmful act. In fact, it paves the road for a better and developing future for our descendants.

Conclusion

Saving every possible penny will be gathered and saved for a better tomorrow. If not for you, then for your family. Tax is a challenging road, but we believe you might have some thoughts after reading through the blog.