Tax savings Beyond Sec. 80C
All of us are almost clear about the Section 80C of the Income Tax Act, where we are getting deduction of upto 1 Lakh from the taxable income. But for most of us, the life insurance premium, PF, School fee etc will, exhaust the entire limit of 1 lakh.
How to save more tax?
There are 3 sections which relate to medical expenses and health insurance /mediclaim. Good understanding of this will help you in substantial tax savings.
All of us have regular medical expenses. This may be towards a health insurance premium, or expenditure related to a family member’s disability/critical illness. The Income Tax Act of 1961 has made provisions to reduce this burden through tax deductions under section 80D, 80DD, 80DDB.
Under this section, health Insurance Premium paid under a scheme framed by any insurer approved by the Insurance Regulatory & Development Authority (IRDA) can be deducted upto 15,000 from your taxable income. For senior citizens, this limit is 20,000.
Under this section, an individual can claim deduction for the health insurance premium paid for self, spouse and children. He can also claim deduction upto 15,000 for the health insurance premium paid for his parents. If either of the parents are senior citizens, this limit is 20,000. The age limit for senior citizen will be 60 from the financial year 2012-13. So, the limit can go upto 35,000 in a year.
Recent budget provides for a preventive health check up at a cost not exceeding 5000/- in a year, but within these overall limits.
This is a deduction in respect of maintenance expenses including medical treatment of handicapped dependent.
The deduction is available for the amount spent for spouse, children, parents brothers or sisters of the individual. The second condition is that the disabled person should be wholly or mainly dependent on the person seeking the deduction for their support and maintenance. The dependent should have a disability of at least 40%, and for claiming the deduction the assessee has to furnish a copy of certificate issued by the medical authority.
The following 2 expenses are exempted under this section:
- Expenditure for the medical treatment, training, nursing and rehabilitation of the dependent
- Amount paid/deposited under any scheme framed in this behalf by the LIC or any other insurer or the administrator or specified company and approved by the Board in this behalf, for the support/maintenance of the dependent
A fixed deduction of Rs 50,000/- is allowed irrespective of amount incurred in Option 1 or 2. Deduction of Rs. 1, 00,000/- is allowed if the dependent has the disability of more than 80%.
This deduction is in respect of medical treatment of a specified disease or ailment as prescribed by the government. 80DDB deductions are available for expenditure incurred in respect of assessee himself or his dependent spouse, children, parents, brothers/ sisters.
Assesee shall have to submit certificate in form no 10-I from prescribed specialist working in a government hospital.
The eligibility for deduction in this section is the actual expenses subject to a maximum of 40,000/-. The limit is 60,000 in the case of senior citizens. If you are getting any reimbursement for this from your employer/insurance company, you will get only the balance.
This deduction cannot be allowed by your employer while calculating the TDS amount. So you have to apply for claiming this deduction while filing the IT return.
The specified disease eligible under this section are
- Neurological diseases where the disability levels are above 40%.
- Malignant Cancers
- Chronic renal failure
- Hematological disorders
An understanding of these provisions will help us in getting more tax benefits. If you know anybody, who can be benefited under these sections, please share with them.