The Income-tax Act allows small and medium enterprises to pay tax on a presumptive basis. The purpose of this scheme is to ease the burden of compliance on small businesses. When an entity opts for presumptive taxation, it can pay tax on presumptive basis without keeping books of account.
An individual, a HUF, a partnership firm or an LLP involved in any business is subject to Section 44AD. Under this scheme, eligible taxpayers can compute their taxable income on a presumptive basis if their business turnover does not exceed Rs. 2 crores. The presumptive income from such a business shall be 8% of its total turnover for the year. The presumptive income on turnover or receipts received by account payee check, bank draft, or electronic clearing system will be 6% of total turnover.
Under sections 30 to 38 of the Income tax Act, 1961, no further deduction is allowed on presumptive income computed under section 44AD. Nevertheless, presumptive income may be deducted under chapter VI-A.
Medical Insurance Premium Deduction [Section 80D]
Contents
An individual or a HUF can deduct the following payments under section 80D:
- A medical insurance premium paid by an individual or a HUF in any manner other than cash by the assessee.
- Contributions made by the assessee, being an individual, to the Central Government Health Scheme or such other scheme as may be notified by the Central Government.
- Amount paid by an individual for a preventive health check-up. Health expenditures incurred by assessee, being an individual or HUF, on the health of a very senior citizen, provided that no amount has been paid for such an insurance.
Deduction amount
An individual cannot deduct more than:
- An aggregate of $25,000 for medical insurance premiums or preventive health checkups.
- ₹25,000 for medical insurance premiums or preventive health checkup payments.
- ₹25,000 in respect of contributions to the Central Government Health Scheme or any other scheme notified by the Central Government.
- ₹30,000 for medical expenses incurred by the assessee, his/her spouse, dependent children or parents.
Points to Keep in Mind
When claiming a deduction under section 80DDB deduction limit, keep the following points in mind:
- An official copy of the certificate (Form No. 10-I) issued by a neurologist, oncologist, urologist, haematologist, immunologist, or other specialist working in a government hospital is required.
- Amounts received by the taxpayer from any insurer or from his employer as reimbursement for such expenditures shall be deducted from the amount of deduction computed in aforesaid manner.
Exemptions: How Do I Get Them?
The insurance premium is the amount paid to an insurance company that promises to pay the insured’s hospital expenses, subject to the coverage limit and sublimits.
For income tax purposes, health insurance premiums are deducted from total income.
How Much Is the Section 80D Deduction for Health Insurance?
Insuring oneself, one’s spouse, and one’s dependent children:
- The taxpayer can receive up to $25,000 a year if he or she is under 60 years old
- The taxpayer can receive up to $30,000 a year if he or she is 60 years old or older
Parents’ insurance coverage:
- Parents under 60 years of age can receive an additional deduction of up to $25,000 per year
- Parents over 60 years of age can deduct up to $30,000.
Under Section 80D of the Income Tax Act, tax deductions are also available for health top-ups, super top-ups, and critical illness covers.
In addition to the above deductions, are there any other deductions?
Deductions are also allowed for preventive health checkups up to $5,000. However, this is not an additional deduction. Health insurance deductions include expenses for preventive health check-ups.
Health insurance premiums of $22,000 and preventive health check-ups of $5,000 will result in a total deduction of $25,000. The maximum deduction for health insurance under Section 80D is $25,000.
Taxpayers who are senior citizens (60 years and older) can deduct the entire amount of $27,000. If you are 60 years or older, you are entitled to a deduction of $30,000.
In the same way, the costs of preventive health checks are included in the overall ceilings for health insurance for parents. Individual taxpayers can also deduct for Hindu undivided families (HUF).