Payment of premium on life insurance policy and health insurance policy not only gives insurance cover to a taxpayer but also offers certain tax benefits. In this part you can gain knowledge about deductions available to a taxpayer on account of payment of life insurance premium, payment of health insurance premium and expenditure on medical treatment.
Total income from all the heads of income is called as “Gross Total Income” (GTI). To arrive at taxable income, one has to deduct from GTI, the deductions allowable under Chapter VIA (i.e., under section 80C to 80U). In other words, we can say that Taxable Income = Gross Total Income less Deductions under section 80C to 80U.
Following general rules should be kept in mind before claiming these deductions under section 80C to 80U:
1) No deduction under Chapter VI-A (under section 80C to 80U) shall be allowed from the following income:
i) Long-Term Capital Gains.
ii) Short-Term Capital Gains covered under section 111A.
iii) Winnings from lotteries, horse race, etc., referred to in section 115BB.
iv) Income covered under sections 115A, 115AB, 115AC, 115AD, 115BBA and 115D.
2) The aggregate amount of deduction under section 80C to 80U cannot exceed GTI (i.e., GTI excluding incomes referred to above).
The list of deductions under section(s) 80C to 80U is quite long, however, in this part we will gain knowledge on some major deductions covering deductions available to a taxpayer on account of payment of life insurance premium, investment in PPF/NSC, payment of health insurance premium and expenditure on medical treatment.
A- Deduction in respect of Life insurance premium, PPF, NSC, etc. [Section 80C]
B- Deduction in respect of medical insurance premium [Section 80D]
C. Deduction in respect of expenditure on training/medical treatment of a dependent, being a person with disability [Section 80DD]
D- Deduction in respect of expenditure on medical treatment of specified diseases [Section 80DDB]