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TMI BlogUnderstanding Health Insurance Deductions : Insights from Clause 126 of the Income Tax Bill, 2025 Vs. Section 80D of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... rasting it with the existing Section 80D of the Income Tax Act, 1961. The analysis will cover the legislative intent, detailed breakdown of provisions, practical implications, and a comparative analysis between the two provisions. Objective and Purpose The primary objective of Clause 126 in the Income Tax Bill, 2025, is to provide tax deductions to individuals and HUFs for expenses related to health insurance premiums and medical expenditures. The legislative intent is to encourage taxpayers to invest in health insurance and prioritize preventive health care. This provision aligns with the broader policy considerations of promoting health insurance coverage and reducing the financial burden of medical expenses on taxpayers. Section 80D o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts. Preventive Health Check-up Sub-section (3) specifies that deductions for preventive health check-ups (under sub-sections 2(a) and 2(b)) are capped at Rs. 5,000 in aggregate. This provision underscores the government's emphasis on preventive healthcare, encouraging taxpayers to undergo regular health check-ups. Aggregate Limit Sub-section (4) imposes an aggregate limit of Rs. 50,000 on the deductions under sub-sections 2(a) and 2(c), or 2(b) and 2(d). This cap ensures that the deductions remain within a reasonable range, balancing the need for financial relief with fiscal responsibility. Deductions for HUFs Sub-section (5) outlines the deductions available to HUFs, allowing for deductions on: - Health insurance premiums fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (10) provides definitions for terms such as "appropriate fraction," "family," and "relevant tax year." These definitions ensure clarity and precision in the application of the clause. Insurance Schemes Sub-section (11) specifies that eligible health insurance must be provided by the General Insurance Corporation of India or other insurers approved by the Insurance Regulatory and Development Authority. This ensures that the insurance schemes meet regulatory standards and provide adequate coverage. Practical Implications Clause 126 has significant implications for various stakeholders: - Individuals and HUFs: The clause provides substantial tax relief, encouraging investment in health insurance and preventive healthcare. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eck-ups - Clause 126 and Section 80D both allow deductions for preventive health check-ups, capped at five thousand rupees. This reflects a consistent policy approach to promoting preventive healthcare practices. Mode of Payment - Both provisions mandate non-cash payments for most deductions, allowing cash payments only for preventive health check-ups. This ensures transparency and traceability of transactions. Definitions and Clarifications - Clause 126 provides detailed definitions for terms such as "appropriate fraction," "family," and "relevant tax year." These clarifications enhance the understanding and application of the provision, reducing potential ambiguities in interpretation. Conclusion Clause 126 of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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