Spend, Save and Invest Smartly

Change in Section 80D





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.

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 Nil INR 44,000
Education cess @ 3% 3% of INR 44,000 INR 1,320
Net Tax Payable Nil 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.

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