Budget 2024: Reasons to Increase Section 80D Tax Deduction Under Old Tax Regime
As per the Income-tax Act of 1961 section 80D is dedicated to the deduction of medical expenses and premiums that are incurred on health of a Taxpayer. The deduction limit in section 80D has remained unaltered for the past few years. Those opting for the old tax regime have been expecting an enhancement in the section 80D limit in the Budget which will be presented on 1st July 2024. Taxpayers are expecting an hike, as the medical expenses have drastically gone up, especially after COVID Pandemic.
What is the present 80D limit?
Medical insurance for self, spouse, and children, if non-senior citizen, can be claimed up to Rs. 25,000, and if senior citizen, up to Rs. 50,000 via Section 80D of the Income Tax Act. This limit also includes the Rs. 5,000 deduction for expenses incurred for preventive medical check-ups. The individual, spouse, and dependent children have to pay the premium. Also, parents’ health insurance premiums are an additional tax deduction that can be claimed.
It is, however, noteworthy that an individual cannot avail of this deduction if one opts for the new income tax regime; in other words, this deduction is available only for taxpayers who continue with the old tax regime in a particular financial year.
Why hike in limit of Section 80D for tax deduction is expected in Budget 2024?
Health insurance, particularly a floater plan for a family, is not a mere expense but it is one of the best lifetime investments. It can guarantee you and your family’s welfare later in life and give a feeling of security in future life.
It is a reminder that as you age the health insurance cost will also increase. That is why, setting a goal of securing health insurance coverage that helps in meeting future needs is a must. This is why, the amount that an individual can claim as a deduction under Section 80 D ranges between Rs. 50000 to Rs. 100000.
The insurance sector seeking Budget 2024 to increase the present limit of Rs 25,000 under Section 80D which sometimes does not cover the average amount spent on health insurance by many taxpayers of different ages.
India is a sensitive market where price changes are uncertain and here consumers seek maximum value, therefore, tax benefits are a significant inspiration to purchase health insurance.
Health Insurance provides tax benefits under Section 80D and from a saving perspective it looks attractive. To be more precise, 80D tax exemption should linked to inflation and must be reviewed from time to time.
When the current limit of Rs. 1 lakh specified for tax deductions is raised, more people would prefer going for health insurance. At the moment policyholders can claim deductions of up to Rs. 25,000 in case of parents below 60 years of age and Rs. 50,000 for above 60 years of age.
Deduction on Preventive Health Checkups
Section 80D provides that an individual can claim upto Rs. 5,000 for a health check-up that is preventive in nature. Additionally, tax benefit is provided up to the maximum deduction limit of Rs. 25,000 or Rs. 50,000 as the case may be.
Thus, if a health insurance subscription of Rs 21,000 is paid by an individual under the age of 60, an extra benefit of Rs 4,000 for a preventative health check-up can be claimed by them. Preventative examinations for health are provided by many diagnostic laboratories and hospitals.
Other factors to consider
The tax deductions under section 80D can be availed in case health premiums are deposited either through cheque, debit card, credit card, UPI, and so on. Therefore, if a person deposits the Health Insurance premium amount in cash, the facility of Tax deduction under section 80D cannot be availed. Nevertheless, cash payment is accepted for preventative health deduction of Rs. 5000.
