It is also important to keep in mind various tax benefits available in respect of medical expense to minimize the cost and save taxes
Medical expenses tend to occur unexpectedly and untimely, hitting hard on the pocket. While we may not be able avoid them, we can cover the same with appropriate insurance policies. It is also important to keep in mind various tax benefits available in respect of medical expense to minimize the cost and save taxes, wherever possible.
Some of the tax benefits provided in the Income-tax Act, 1961 (the Act) are outlined below:
1. Medical reimbursements:
Salaried individuals are entitled to claim tax-free reimbursement of medical expenses incurred for self and family to the extent of Rs 15,000. Employees are required to furnish proper medical bills in support. Any reimbursement provided in excess of Rs 15,000 is treated as a perquisite and taxable in the hands of the employee.
2. Medical insurance premium:
Tax deduction is available to all individuals for medical insurance premium paid by them in respect of self, spouse or dependent children. Deduction is also available for a specified sum in case of medical insurance premium paid for parents. This deduction includes expense for preventive health checkup up to Rs 5,000.
3. Medical expenses incurred for disabled dependents:
Deduction of Rs 75,000 is allowed to resident individuals in respect of expenses incurred for the medical treatment, training and rehabilitation of a disabled dependent. In case of severe disability as specified in the laws, a higher deduction of Rs 1,25,000 is available. This deduction is allowed irrespective of amount of expenditure actually incurred. The individual is required to furnish a certificate issued by the medical authority in a prescribed form in order to claim the deduction.
4. Medical expenses incurred by disabled individuals:
Similar to above deduction, disabled individuals are also entitled to tax deduction of Rs 75,000 / Rs 1,25,000 in case of expenditure incurred on disability / severe disability upon furnishing of certificate issued by the medical authority in a prescribed form.
5. Medical expenses on some specified diseases:
Deduction of up to Rs 40,000 is allowed for medical expenses actually incurred for self and dependents in respect of specified diseases like neurological diseases, malignant cancers, AIDS, Chronic Renal Failure, Hemophilia and Thalassemia. Tax payers are required to furnish a certificate from a prescribed medical specialist in order to claim this deduction.
Deduction of Rs 60,000 is allowed in case of medical expense for specified disease incurred for a senior citizens and Rs 80,000 for very senior citizens.
To sum up, it may be possible that you are incurring the above expenses but are not claiming the tax benefit. It is time for you to relook and preserve the medical bills / insurance receipts so that you may can avail the tax benefits. After all, any amount of tax savings is good as it can help you in meeting your other important day-to-day expenses.
(The author is Partner, KPMG in India. Prateek Agarwal, Manager, also contributed to the article. The views expressed by them are personal)