Claim tax benefits for your medical expenses

It is rightly said that “health is wealth”. To ensure good health of ourselves and our families, medical costs are usually on the higher side, which may include medical insurance premium, medicines and hospitalisation costs, among other things. There is, however, some relief from taxes for such expenses.

Medical insurance: In times of rising medical costs, it is wise to invest in medical insurance for yourself and your family. By doing so, one not only ensures medical cover for oneself and the family during a medical emergency, but also gets relief from tax benefits associated with the expenses.

As per Section 80D of the Income Tax (I-T) Act,1961, a deduction can be claimed by an individual for the premium paid towards medical insurance or any contribution made to the Central Government Health Scheme. The deduction can be claimed up to Rs 15,000 per annum or the amount paid, whichever is lower. Here, family would mean spouse and dependent children of the individual.

In addition to the above, an individual can also claim deduction for the medical insurance premium paid up to Rs 15,000 per annum for parent(s) or the amount of premium paid, whichever is lower. Further, these deductions are increased up to Rs 20,000 per annum in case the premium is paid for a senior citizen (65 years old or more).

For example, if a person buys health insurance for himself and his parents, who are senior citizens, then the total premium that can be deducted from his taxable income will be Rs 35,000 per annum (Rs 15,000 for self plus Rs. 20,000 for parents).

It is imperative to note that for claiming an exemption under Section 80D, the payment for the same should be made by any mode other than cash. In addition, only medical premium paid under the medical insurance scheme of General Insurance Corporation, approved by the central government, or any other insurer, approved by the Insurance Regulatory and Development Authority (Irda) shall be eligible for the tax benefits specified above.

Reimbursement of medical expenses of employees: Reimbursement of expenditure actually incurred by the employee for his or his family member on medical treatment (domiciliary medical expenses) is exempt for up to Rs 15,000 per annum. Any reimbursement that is above the said limit would be liable to tax as income in the hands of the employee. Family for this purpose includes spouse, children, parents, brothers and sisters of the individual or any of them wholly or mainly dependent on the individual.

Generally, the employers insist on submission of original medical bills by the employee before making the said reimbursement prior to providing an exemption.

Dependent with a disability: In case an individual has incurred any expenditure on a dependent with a disability, then he would be allowed maximum deduction of Rs. 50,000 per annum or Rs 1,00,000 per annum, depending on the severity of the disability of the dependant under Section 80DD of the I-T Act. The expenditure could be on account of the medical treatment (including nursing), training and rehabilitation or an amount paid/deposited under any scheme framed in this behalf by the Life Insurance Corporation of India (LIC) or any other insurer for maintenance of the dependent.

Few specified diseases: An individual can claim a deduction up to Rs 40,000 per annum (Rs 60,000 in case of senior citizens) under Section 80DDB of the I-T Act for expenses incurred on treatment of certain prescribed diseases or ailments, such as malignant cancers and AIDS, among others, subject to fulfillment of conditions prescribed under the I-T Act.

Therefore, it can be said that while medical costs have increased substantially, the silver lining is that one may claim tax deductions available for these expenses.