The amount of reimbursement from the insurer or employer, if any, shall be deducted from the amount claimed as deduction under section 80DDB.
After the part one of the Last Minute Tax Planning tips that talked about investments that can be made which will make you eligible for deductions from your taxable income, this part will talk about your medical expenses incurred in the last financial year.
The year 2020 has been a challenging one for everyone as the raging pandemic gripped the world and brought it to its knees. However, the silver lining to this tumultuous year is that you can still claim deductions for medical bills and other medical expenses paid for yourself or your family members.
Below are the deductions that can be claimed from taxable income of the previous year under the Income Tax Act:
Medical insurance premia and expenses
If you have paid to keep in force a health insurance policy for yourself or any of your family members (spouse and dependent children) or have brought a new policy, you are eligible for a deduction from your gross taxable income in the financial year 2020-21 under section 80D. Similarly, contributions made to any Central Government Health Scheme are also deductible and the amount of deduction is capped at an aggregate of Rs 25,000.
In the case of medical insurance of parents of the individual, a deduction of Rs 25,000 can be claimed. However, the aggregate of premiums or contributions made for the individual, family and parents can not exceed Rs 50,000.
If there are any medical expenses incurred for yourself or your spouse or dependent children, that amount can also be deducted under this section of the act. The deduction is restricted to an aggregate of Rs 50,000 in such cases. Similarly, in the case of parents also, Rs 50,000 are allowed.
Preventive health checkup
Preventive health checkup allows mitigating the risk of occurrence of an illness through regularly monitoring the overall health. In order to promote such regular checkups, the government has included a deduction of Rs 5,000 under Section 80D. The deduction can be claimed for yourself, spouse, dependent children or parents.
It is important to note that the amount of this deduction is capped at Rs 5,000 and is considered as a part of the upper limit of Rs 25,000/50,000 mentioned above.
All the abovementioned expenses except made for preventive health checkup should be made through modes other than cash.
Medical expenses for certain illnesses
In case of serious illnesses where a medical treatment from a specialist, a deduction can be claimed by an individual for the amount paid but a maximum of Rs 40,000 under section 80DDB. A prescription for such medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist is required for claiming this deduction.
The deduction is extended to medical expenses of self or a dependent including the spouse, children, parents, brothers and sisters.
In the case of medical treatment of senior citizens, the limit is extended to Rs 1,00,000.
Also, the amount of reimbursement from the insurer or employer, if any, shall be deducted from the amount claimed as deduction under section 80DDB.
For expenditure in respect of a disabled individual or a dependent of the individual including spouse, children, parents, brothers and sisters, a deduction under section 80DD can be claimed.
The expenses allowed are for the medical treatment (including nursing), training and rehabilitation or paid under any scheme by Life Insurance Corporation or any other insurer upto Rs 75,000. In cases of severe disability, the deduction can be claimed upto Rs 1,25,000.
Note: Except for the 80DDB deduction which is claimed for expenses of medical treatment, all other deductions mentioned above can be claimed irrespective of the actual expense incurred, provided a valid disability certificate is available from a competent medical authority. Under 80DDB, actual treatment expenses or the maximum limit, whichever is lower, can be claimed.
Now you know how to reduce your tax payout by making use of all those medical bills from this financial year. Look out for the part three for more tax- saving tips of this series.