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Change in Section 80D

    IndianMoney.com Research Team | Friday, March 06,2015, 01:21 PM
 

Change in Section 80D

how-does-change-in-Section-80D-affect-you

There is a famous saying "From the bitterness of disease man learns the sweetness of health". Investing in your health is a long term investment that bears fruit later in life.

The Government realizes this and to encourage you to take up a health plan gives you tax benefits.

quote-by-Josh-Billings what-is-Section-80D-of-the-income-tax-act

What is Section 80 D of the income tax act?

You have the Section 80 D of the income tax act where you get a deduction of INR 25,000 a year on the health insurance premium you pay for a health plan for yourself and your family if you are under 60 years of age.

In case of premium for a health plan of a senior citizen (above 60 years of age) the deduction allowed shall be up to INR 30000 a year.

Income tax slabs and rates for the Union Budget 2015-16 continue to remain the same as last year.

Let us take a look at the income tax slabs for Individual Tax Payers up to the age of 60 years (Male/Female) in the Union Budget 2015-16

Annual Income (INR)

Tax Rate

0 -  2,50,000

Nil

2,50,001-5,00,000

10 %

5,00,001-10,00,000

20 %

Above 10,00,000

30 %

Mr Diwakar 35 years of age , married and working in an IT firm earns INR 8 Lakhs a year.

He invests INR 1 Lakh a year in an ELSS scheme and INR 1 Lakh a year in a PPF. He avails a deduction of only INR 1.5 Lakhs under Section 80 C of the income tax act even after investing INR 2 Lakhs in tax saving instruments.

Mr Diwakar has availed a family floater health plan for himself and his family and avails a deduction of INR 25000 a year on the premium he pays under Section 80 D of the income tax act.

Mr Diwakar also takes a health plan for his Dad and avails a deduction of INR 30,000 a year on the premium he pays under Section 80 D of the income tax act.

Heads

Amount

Gross taxable salary

INR 8,00,000

Less : Investment in ELSS + Investment in PPF up to
INR 1.5 Lakhs under Section 80 C

INR 1,50,000

Less : Tax deductions under Section 80 D for a family floater
health plan for spouse and family (INR 25,000) + Health
insurance plan for father who is a senior citizen.(INR 30,000)

INR 55,000

Total  Taxable Income

INR 5,95,000

Mr Diwakar’s income tax liability is calculated as per the income tax slabs of the Union Budget 2015-16

Heads

% of income Tax

Income Tax

Up to INR 2,50,000

Nil

Nil

INR 2,50,001– INR 500,000
Income tax is paid on
INR 2.5 Lakhs.
(INR 5,00,000 – INR 2,50,000)

10%

INR 25,000 (A)

INR 5,00,001– INR 5,95,000
Income tax is paid on INR 95,000
INR 5,95,000– INR 5,00,000)

20%

INR 19,000 (B)

Total Tax

  INR 44,000

Education cess @ 3%

3% of INR  44,000

INR 1,320
Net Tax Payable  

INR 45,320

How does the increase in the exemption limit under Section 80 D help you?

Section 80 D before the Union Budget 2015-16 :
You have the Section 80 D of the income tax act where you used to get a deduction of INR 15000 a year on the health insurance premium you pay for a health plan for yourself and your family if you are under 60 years of age.

In case of premium for a health plan of a senior citizen (above 60 years of age) the amount of deduction was INR 20,000 a year.

Heads

Amount

Gross taxable salary

INR 8,00,000

Less : Investment in ELSS + Investment in PPF up to INR 1.5 Lakhs
under Section 80 C

INR 1,50,000

Less : Investment in ELSS + Investment in PPF up to INR 1.5 Lakhs
under Section 80 C

INR 35,000

Total Taxable Income

INR 6,15,000

Mr Diwakar’s income tax liability is calculated as per the income tax slabs of the Union Budget 2014-15 :

Heads

% of income Tax

Income Tax

Up to INR 2,50,000

Nil

Nil

INR 2,50,001– INR 500,000
Income tax is paid on
INR 2.5 Lakhs.
(INR 5,00,000 – INR 2,50,000)

10%

INR 25,000 (A)

INR 5,00,001– INR 6,15,000
Income tax is paid on INR 1,15,000
(INR 6,15,000– INR 5,00,000)

20%

INR 23,000 (B)

Total Tax

3% of INR 48,000

INR 48,000

Education cess @ 3%

  INR 1,440

Net Tax Payable

 

INR 49,440

Diwakar saves INR 49,440 – INR 45,320 = INR 4,120 on paying the health insurance premiums for his family and his dad who is a senior citizen.

Investing in health insurance means you save on your medical bills as well as your taxes.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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