Beyond Section 80 C, Section 80D, 80 DD, 80 DDB & 80 U are some other options to reduce tax liability. You can decrease your taxable income by investing in various tax saving instruments. Normally, we all maximize our tax savings with Section 80C, which is known to most of us.
We all spend some amount of money every year towards various medical expenses. This could be for doctor consultation, treatment of certain serious diseases, regular medication etc. Some of you may be spending on treatment of dependents suffering from disability or critical illnesses. You may have opted for a health insurance policy to take care of the hospitalization expenses. The Income Tax on salary Act provides certain exemptions to reduce your tax liability. Especially if you are spending the amount as described above. This is how you can reduce get tax benefits in addition to the deductions under section 80C.
Now, let us analyze the exemptions in detail.
Section 80D, 80 DD, 80 DDB and 80 U
Deduction under Section 80D for FY 2020-21 and AY 2021-22
In Section 80D, you can claim exemption up to Rs. 25,000 in a year. This exemption can be claimed towards premium paid to buy a health insurance policy. The policy can be brought from any of the insurance companies approved by the insurance regulator, IRDA. If you are a senior citizen, the exemption limit is Rs. 50,000.
You can claim deduction for the health insurance premium paid for insuring yourself, your spouse and children. You can also claim additional deduction up to Rs. 50,000. This deduction can be claimed for the health insurance premium paid for your parents. (If their age is more than 60 years.)
If your parents are aged below 60 years, the maximum deduction that can be availed for parents is 25,000.
The Budget for FY 2012-13 announced an additional benefit in this area. You can spend Rs. 5000/- in a year for a preventive health check-up. But this falls within the overall limit of Rs. 25,000.
So, the total deduction you can claim for your family and parents is Rs. 75,000.
The maximum deduction that can be availed is 1 Lakh. This deduction can be claimed if you are a senior citizen and paying health insurance premium for your parents too.
HUF can also avail deduction under Section 80D if HUF has taken health insurance policy for any of its member. The limit of deduction for HUF is 25,000 if the member’s age is less than 60 years. Whereas it is 50,000 if the member’s age is more than 60 years.
Also Read : Best Investment Options for Senior Citizens
Tax Benefits – Section 80D Example
Suppose Ajay is 24 years old and his parents are 55 years old. He purchased an individual health insurance policy for himself and a family floater for his parents. The maximum deduction allowed for Ajay would be – 25,000 for himself and 25,000 for parents.
Now suppose Ajay`s parents are 62 years old in the above-mentioned example. In this case, the maximum deduction allowed would be – 25,000 for himself and 50,000 for parents.
Section 80DD Deduction
If you have a handicapped dependent, then you are eligible for certain exemptions under Section 80DD. Section 80DD exemption is for the amount spent on dependents like spouse, children, parents, brothers or sisters. The disabled person should be wholly dependent on you for their support and maintenance. Also, the dependent should have a disability of 40% or more. You will be required to produce a certificate to this effect issued by the Medical Board.
You can claim Section 80DD exemption in the following 2 cases:
If you deposit any amount in schemes of LIC or any other insurer for the maintenance of the disabled dependent. From this scheme, an annuity or a lump sum amount is paid to the dependent or to a nominee. The amount paid is mainly for the benefit of the dependent in case of your death.
If you incur any expenditure on the medical treatment, training, nursing and rehabilitation of the dependent. You can claim a fixed exemption of Rs. 75,000 in a year in this section. This exemption is fixed at Rs. 75,000 irrespective of the actual amount spent under the above 2 categories. But, if the disability is above 80%, the exemption allowed is Rs. 1.25 Lakh.
Section 80DDB Deduction for AY 2021-22
You can claim exemption under Section 80DDB, if you’re spending on treatment for certain specified ailments notified by the government. The amount can be spent on treatment for self, spouse, children, parents, brothers and sisters provided they’re dependent on you. But you have to produce the certificate in the prescribed format to that effect from a specialist government doctor.
The following are the ailments which will qualify for this exemption:
- Renal Failure
- Haematological Disorder
- Neurological Issues
You can claim exemption for the actual expenses, but the amount will be limited to Rs. 40,000 in a year. But for senior citizens, this limit is Rs. 1,00,000. But suppose you already have any reimbursement scheme for such expenses from your insurance policy or employer. In such a case, you cannot claim it again. In fact, you can claim only for the shortage. Another problem is that your employer will not permit you to show this deduction in the tax calculations. So, you have to claim this as refund from the IT department by filing the Returns.
So, Section 80U permits certain exemption, if you are suffering from a permanent disability or mental retardation. Also, you will get exemption of Rs. 75,000 in a year under this section. If the disability is above 80%, the exemption is Rs. 1.25 Lakh.
First of all, we need to invest in Section 80C to save taxes. In addition, we can use deduction under Section 80D to save more taxes.
Now that you have read this article, what’s your view on the tax saving instruments under section 80D? Also, share this with your friends. Deductions under Section 80D, 80 DD, 80 DDB & 80 U may prove useful for somebody.