Mistakes You Need to Avoid when Claiming for Deduction under Section 80D

Introduction

Section 80D of the Income Tax Act provides deductions on medical insurance premiums paid for you and your family members. It is a powerful provision that allows you to secure your health and save on your income tax liabilities. However, there are some common mistakes that you should avoid while claiming deductions under Section 80D.

What is Section 80D?

Section 80D of the Income Tax Act was introduced to encourage individuals to invest in health insurance for themselves and their families. It provides substantial relief on taxable income, thus reducing the overall tax burden. This section covers deductions for payments made towards health insurance premiums and preventive health check-ups, among other medical expenses. As a taxpayer, being well-versed with the provisions of Section 80D can significantly benefit your financial planning.

What are the mistakes to avoid when claiming a deduction under Section 80D?

The following are the mistakes to avoid when claiming under Section 80D of the Income Tax Act:

Mistake 1: Not claiming all eligible deductions

A common mistake is not claiming all the deductions that you are eligible for under the Income Tax Act. For example, if you have paid a premium for a health insurance plan, you can claim a deduction under Section 80D.

Mistake 2: Not paying the premium on time

Timeliness is key when it comes to premium payments. Failure to pay your health insurance premiums within the stipulated timelines can result in the nullification of your deduction claim under Section 80D. Keep track of the due dates and ensure prompt payments to avoid any last-minute hiccups. 

Mistake 3: Not keeping proper records

In the rush of managing multiple financial obligations, it’s easy to overlook the significance of thorough documentation. Ensure you possess all necessary documents, including premium receipts, medical bills, and health insurance certificates. Incomplete or incorrect paperwork can lead to a rejection or delay in the processing of your claim.

Mistake 4: Failing to Include Dependent Details

Section 80D allows deductions for premiums paid for the health insurance of family members, including dependents. Neglecting to include the necessary details of dependents in your claim can lead to discrepancies and subsequent rejection. Provide accurate and complete information to validate your eligibility for the deduction.

Mistake 5: Claiming a deduction for the wrong amount

The deduction under Section 80D is subject to certain limits. For individuals and Hindu Undivided Families, a deduction of up to ₹1,00,000 can be claimed for the medical insurance premium paid for themselves, their spouse, and dependent children. For senior citizens (above 60 years of age), the limit is ₹50,000. If you claim a deduction for an amount higher than the limit, your claim will be rejected.

Mistake 6: Not considering preventive health check-ups

Understanding what expenses qualify for deductions under Section 80D is crucial. Expenses such as preventive health check-ups, medical treatments, and health insurance premiums are typically covered. However, certain non-eligible expenses may not be deductible. Ensure you differentiate between eligible and ineligible expenditures to avoid any confusion during the claim process.

Mistake 7: Inaccurate Information on Policies

Providing inaccurate or misleading information about your health insurance policies can lead to severe consequences during the tax assessment. Ensure that the details furnished align precisely with the information documented in your insurance policy. Discrepancies in policy information can raise red flags and result in the disqualification of your deduction claim.

Mistake 8: Not disclosing pre-existing diseases

If you have any pre-existing diseases, you should disclose them to the insurance company while buying the policy. If you do not disclose them and make a claim later, the claim may be rejected.

Mistake 9: Overlooking Add-On Benefits

Many health insurance plans offer additional benefits, such as coverage for specific critical illnesses or preventive care services. Failing to consider these add-on benefits while calculating your deduction claim can result in missed opportunities for additional tax savings. Conduct a comprehensive review of your health insurance policy to leverage all potential benefits under Section 80D.

Conclusion

In conclusion, claiming deductions under Section 80D can help you save on your income tax liabilities. However, you should avoid the common mistakes mentioned above to ensure that your claim is not rejected. Keep proper records, pay the premium on time, and claim the deduction for the right person and the right amount. By doing so, you can make the most of the tax benefits offered under Section 80D.