Health problems coupled with their associated treatment expenses have been undergoing a rhetoric rise in recent years especially due to poor lifestyle choices and changing food habits. A research study had revealed that Indians self-finance 78% of their medical expenses out of which 72% comprise of expenses related to purchasing medicines both before and after the procedures. This was the main reason behind the introduction of several provisions in Income Tax Act 1961 for providing requisite relief to the society. Today we are going to take a detailed look at the tax benefits which can be claimed by an individual out of his medical expenses in AY 2018-19.
- Medical Allowance – This refers to the fixed quantum of money paid to the employees by some employers on a monthly basis. Employees cannot claim the same as a deduction from their taxable income. Medical allowance is made subject to complete taxation under ‘Income from Other Sources’ head in such scenarios.
- Medical Bill Reimbursement By Employer – Employees can claim an exemption out of the same on fulfillment of the following conditions:
- Medical bills pertain to medicines which have purchased from pharmacies or medical shops or while treating any ailment at a private hospital, clinic or public hospital.
- Medical expenses have been incurred on self or children, spouse and completely dependent siblings or parents.
- Medical bills have been submitted with the employer with no further reimbursement claimed while filing the income tax return.
- Section 80D Tax Deduction – 25000 INR can be claimed as deduction arising out of medical insurance provided you are paying a yearly premium on the same. If the assesse falls under the senior citizen age category, then his exemption amount increases to 50000 INR annually from 2018-19 financial year whereas super-senior citizen can claim deduction up to 100000 INR.
- Section 80DD Tax deduction –A HUF or resident individual can claim deduction on the rehabilitation expenses incurred on a handicapped dependent relative u/s 80DD of Income Tax Act 1961. A fixed deduction of 75000 INR can be claimed when disability ranges between 40-80% whereas 125000 INR can be claimed if the quantum of disability exceeds 80%. However, a certificate of disability from a prescribed medical authority is required for claiming deduction under this section.
- Section 80DDB Tax Deduction – Minor medical treatments, small surgeries and even medical consultations hold the ability of burning a deep hole in your wallet. In such a scenario, you can bring down your tax burden by availing the available deductions up to the maximum ceiling. A member of HUF or resident individual can claim deduction u/s 80DDB on medical expenses incurred on self, children, spouse, parents and dependent siblings. However, this benefit can only be enjoyed by an assessee who remains an Indian resident during the specified financial year when the deduction has been claimed. Rule 11D of Income Tax act has specified the following ailments and diseases which can be claimed as a deduction u/s 80DDB.
- Malignant Cancer.
- Neurological diseases identified by a specialist with disability level certified to be at least 40% or above such as Dystonia MusculorumDeformans, Dementia, Motor Neuron Disease, Hemiballismus, Chorea, Parkinson’s Disease, Aphasia and Ataxia.
- Chronic Renal failure.
- AIDS- Acquired Immuno-Deficiency Syndrome.
- Hematological disorders like Thalassaemia or Hemophilia.
It is imperative to note here that this section does not cover common medical expenses such as C-section or cataract. The age of the person on whom all medical treatment expenses has been incurred is considered before claiming the deduction u/s 80DDB. The upper cap of deduction allowed in the provisions of Income Tax Act 1961 has been kept at 40,000 INR or the actual amount paid, whichever is less for expenses incurred on self, dependent or a member of HUF. However, the exemption amount increases to 1,00,000 INR or actual expenses incurred, whichever is less if the medical expense in incurred on a senior or super senior citizen. It is essential to understand that the amount of deduction claimed u/s 80DDB is exclusive of any other deduction which has been covered by other sections under Chapter VI-A. Any amount which has been reimbursed by the employer or received from the insurer on account of health insurance policy needs to be adjusted with the amount of deduction which can be claimed u/s 80DDB.
- Section 80U Tax Deduction –If any tax resident of India falls prey to disability referred to under section 80DD, then he can claim 75000 INR as a fixed deduction from his taxable income annually. This amount further increases up to 125000 INR for any person suffering from severe disability.
These provisions in unison can be of great assistance in decreasing the tax burden while ushering in various exemptions and deductions related to payment of insurance premiums and other medical expenses.