Explaining section 80D of the Indian tax code
The most common section where people have questions
Section 80D is the section that allows people to get tax deductions for two things -
- Insurance premiums paid
- Preventative health checkups (if the total deduction is within the limit specified)
The calculation of the allowable limit is very simple, lets define two categories -
- the tax payer,their spouse and children (call it category 1)
- the payer's parents (call it category 2)
If a category has senior citizens in it (i.e individuals over 60) the limit is INR 50,000 a year, otherwise INR 25,000, summing the limits of both the categories we get the total deductible allowed. If you and your parents are both over 60, you can get an exemption upto INR 100000 i.e. (50K + 50K) from your gross income, if your parents are senior citizens but you are not the limit is (50000+25000) 75K. Premiums paid in cash are not counted for tax deductions, so the transaction should be through other means. Preventive health checkups are due for a deduction upto 5000 INR a year, provided the total (checkup + premium) does not exceed the limit defined. Below are some examples to illustrate whatever we talked about.
| Category | Self,Spouse | Parents | Limit |
|---|---|---|---|
| Senior Citizen | Yes | Yes | 1 Lac |
| Senior Citizen | No | Yes | 75K |
| Senior Citizen | No | No | 50K |
| Senior Citizen | Yes | No | Are you kidding? |
Some scenarios -
| Limit | Premiums | Checkup | Actual Deduction |
|---|---|---|---|
| 1 L | 85K | 6k | 90K (85+5) |
| 75K | 85K | 2K | 75K |
| 75K | 50K | 0K | 50K |
| 50K | 45K | 10K | 50K(45+5) |
Happy deductions!