How To Save Tax on Medical Treatment of Serious Disease

Introduction

It is often said by our parents that “Bura waqt kisi ko bta k nahi aata” and “Bhagwan kum paisa de par bimari mat de”. But “na chahte hue bhi bimari aa jati h”. We all have someone or other in relation who suffers from serious disease like Cancer, AIDS, Brain diseases and now COVID-19. All we can do is to keep patience and take care of them. But we cannot ignore the fact that very high amount of money is also spent by family for treatment of these diseases on their dependents. Therefore Govt. has given tax benefit to taxpayer if he incurs expenses on these diseases.

1. How to Save Tax

• Tax can be saved by claiming deduction in respect of medical treatment of specified and serious disease u/s 80DDB of Income-tax Act, 1961.
• This deduction is allowed to resident individual and HUF.
• Where individual pays any amount for medical treatment of disease for himself or his dependant being spouse, children, parents, brothers and sisters, than deduction up to Rs. 40,000/- from total income is allowed while calculating taxable income. If taxpayer is in slab rate of 30%, then Rs.12,000/- (40,000*30%) can be saved.
• If HUF pays for members of HUF, then also this deduction is allowed.
• Assessee has to obtain prescription from specialist to obtain deduction.

2.Specified Disease

• Disease for which deduction is given and prescription of authority required is as follows-

It is not possible to attach any prescription with new income-tax forms. The assessee should himself retain the prescription and furnish when required by Assessing Officer.

For prescription no format or form has been issued. The prescription shall contain required information like name, age of patient, name of disease, name and address of Govt. hospital, registration number and qualification of specialist, etc.

3.Amount Received Under Insurance Or Employer To Be Reduced From Deduction

• If certain amount is received under insurance or from employer, than deduction claimed shall be reduced to amount received.
• For Eg: If Mr. Rajesh has paid Rs.1,00,000/- for treatment of her spouse and received 20,000/- from insurance company, then deduction allowed to him shall be Rs.20,000/- (Rs.40,000-20,000).

4. Increased Deduction For Senior Citizens

• If amount for disease is paid for or by senior citizen who is 60 years and above, than deduction shall be increased to 1,00,000/-.

5. Other Things to Know

• Deduction is allowed in the year in which it is paid i.e. on payment basis
• If individual opts for new tax regime, than deduction shall not be available from financial year 2020-21.
• It is exclusive of deduction claimed u/s 80C.

6. Our Comments

This deduction is available apart from 80C deduction of Rs.1,50,000/-. So taxable income can be reduced by 40,000/- or 1,00,000/- .If taxpayer is in 30% slab rate than income tax of Rs.12,000/- may be saved. The figure of tax savings depends on case to case basis. Govt. has taken many initiatives but the same is not known to layman. So next time, if you file your returns do take care of this deduction as it will reduce your tax liability legally. It is always advised to take help of expert while filing returns as the policies of Govt. are changing very frequently.

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The above comments do not constitute professional advice. The Author can be reached at companyfinancialtree@gmail.com or visit website www.financialtreecompany.com . My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company) where we have taken an initiative that allows person to Pay from Heart. We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.