This post will give you a clear picture of tax deductions linked to medical expenses in India. To know about it, all you have to do is give this post a read.
Sedentary lifestyles and hectic schedules have contributed to a slew of lifestyle disorders. The deteriorating health issues, along with increased healthcare costs, might eat into your funds. Also, living through the coronavirus pandemic has taught people the value of having adequate insurance. Medical Expenses Tax Deduction
Purchasing health insurance for you as well as your loved ones might help you in saving tax as per Section 80D of the 1961 Income Tax Act. If you, your parents, and your family members are all above 60 years, you may save a maximum of ₹1,00,000 in tax by simply paying medical insurance premiums.
However, if you cannot afford to pay for medical insurance premiums or are unable to purchase one owing to pre-existing illnesses, you can still save taxes on medical expenses.
Before you continue reading, there’s one thing you should know. From the fiscal year 2020-2021, individuals can continue to use the existing/old tax system by making use of tax exemptions and existing deductions. They may also choose the new, more favourable tax system without claiming any sort of exemptions or deductions.
Deductions under the 1961 Income Tax Act (Sec 80C) for up to ₹1,50,000 claimed by investing in financial products, sec 80D for medical insurance premium paid, sec 80TTA for a deduction on savings account interest earned from a post office or bank, benefit under sec 80DDB, and so on are among the tax benefits foregone by opting for the latest tax regime.
As a result, if you choose the new tax system for the current fiscal year 2021-2022, you’ll be unable to claim the deductions listed below.
Anyway, here is everything to know about saving taxes through medical costs as per the old tax system.
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Under Section 80D
The 1961 Income Tax Act (under Sec 80D) permits you to avoid medical expenses tax deduction from your income before taxation. You may claim this exemption if the following two requirements are met:
- Medical expenses must be expended on oneself, one’s spouse, dependent children, or both. In addition, the individual for whom the medical expenses are spent must be at least 60 years old. As a result, most people would be able to claim this just for themselves/spouses/parents, as dependent children are less likely to be in the 60+ age range.
- The individual who has incurred medical expenses should not be covered by any health insurance coverage.
If these two requirements are met, a maximum deduction of ₹50,000 can be claimed for the cost spent in a fiscal year. To be eligible for this deduction, all medical expenses must be paid in a manner other than cash. This implies that all payments for medical bills must be made through banking channels like credit cards, debit cards, and Net-baking, or through digital channels like mobile wallets, UPI, etc.
Nonetheless, the phrases “preventive health check-up spending” and “medical expense” should not be confused. Preventive health check-up expenses can be paid in cash, and the highest deduction that may be claimed is ₹5,000 regardless of the individual’s age. Medical expenses, on the other hand, must be spent on family members/self (as defined by law) and parents above the age of 60 for the treatment of ailments and diseases.
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Under Section 80DDB
Section 80DDB deductions can only be claimed for expenses incurred for the treatment of illnesses defined in this section of the Income-tax Act. The amount of the deduction that can be claimed is determined by the age of the individual for whom the expense was expended. The deduction may be claimed for either the self or a dependent. If it is claimed for a dependent, the person must be entirely reliant on the one claiming the deduction.
Well, if the individual for whom the expense was spent is under the age of 60, a maximum deduction of ₹40,000 may be claimed. If, on the other hand, the individual is 60 years of age or more, the highest deduction that may be claimed is ₹1,00,000.
This exemption is available regardless of whether the individual is covered by medical insurance coverage. However, keep in mind that the amount of tax exemption claimed shall be reduced by the amount obtained from insurance or paid by the recruiter for the mentioned person’s medical treatment.
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Under Section 80U and Section 80DD
Sections 80U and 80DD basically deal with the tax-saving exemption available for medical expenses paid by handicapped or disabled people. Under both these sections, an individual may claim an exemption for herself or himself or for a dependent who’s differently abled. The rule states a dependent individual is the person’s spouse, parents, siblings, and children.
The amount that may be claimed as a deduction in any provision is not affected by the person’s age. It is determined by the individual’s age. It is determined by the person’s percentage of impairment.
If the impairment is greater than 40% but less than 80%, a ₹75,000 deduction will be permitted. However, if the percentage of impairment is 80% or above, a deduction of ₹1.25 lakh would be granted. This deduction is constant regardless of actual expenditures.
Nonetheless, keep in mind that you cannot claim both of these deductions at the same time.
Section 80DD: A physically-challenged individual may claim a medical expenses tax deduction for the costs of medical care (including nursing), rehabilitation, and training. The tax deduction is claimed from the claimant’s total income before taxation, lowering the total tax owed. The tax deduction may also be claimed if the person paid for or deposited money under any plan of the LIC (Life Insurance Corporation) or any other administrator, insurer, or specified firm for the physically challenged dependant’s upkeep.
In the case of the person’s death, the scheme into which the money’s been put shall offer a lump sum amount or annuity payment for the benefit of the dependent suffering from a disability. The person may also choose a disabled dependent, another person, or a trust to receive money on his or her behalf.
The 2022 Budget has proposed fresh tax benefits for the guardian or parent of a disabled child. According to the proposal, if a handicapped person’s guardian or parent purchases a savings life insurance plan with the handicapped individual as a nominee, the guardian or parent is qualified to claim a tax deduction from gross total income. The tax benefit is available even if the insurance buyer, that is, guardian or parent, is still alive.
Section 80U: In contrast, Section 80U allows for a medical expenses tax deduction if the person herself or himself suffers from a physical disability.
Conclusion
So, we hope by now you understand the Medical Expenses Tax Deduction in India after reading this post. If you have any problem or need a somewhat better understanding regarding the same, you can simply reach out to the legal experts of Vakilsearch. Our experts are ever-ready to help you out regarding any legal matter, ensuring you stay updated.
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