Medical Bill Income Tax Exemption and Steps to Claim It

In the recent past, the number of health issues and their treatment costs has gone up by leaps and bounds all across. The main culprit for this includes poor lifestyle choices and changing food habits. As per a leading report, Indians pay around 78% of their medical costs out of their own pockets.

As a result, many companies in India pay their employees the medical allowance to cover up the costs. It is an allowance which is a fixed amount paid by some companies to employees on a monthly basis.

However, when it comes to saving some income tax, the medical allowance can’t be claimed as a cut from the taxable income. Medical allowance needs to be entirely taxable under the head ‘income from other sources’ in such cases.

For anyone who does not know how to calculate tax on income can take the help of the income tax calculator. It is an online tool that can help you know the taxable income at the click of a button. The income tax calculator is generally made available free of cost at many finance websites and apps.

Reimbursement of medical bills by the company

The Income Tax Act allows a series of deductions and exemptions. One of these exemptions is related to medical bills and similar costs incurred during the fiscal year.

All these costs/expenses include those incurred for self and family members/dependents treatments. The medical expenses’ reimbursement to salaried class employees by employers are not taken under the umbrella of the taxes.

However, to claim this exemption, the following conditions need to be fulfilled such as:

  • The medical expenses incurred on self, spouse, dependent parents, siblings and children can only be claimed for exemption
  • You can also relate these medical expenses with medicines brought from pharmacies or medical shops. It also includes treatments of a disease undertaken at a clinic, private and public hospital.
  • You need to submit these discussed medical bills only with your employer. You should always note that you can’t claim any reimbursement at the time of filing the Income Tax Return (ITR)
  • When it comes to claiming the income tax deduction for medical expenses in a year, there is a limit that you need to adhere to. You can claim tax exemption in lieu of medical bills along with transport allowances up to a deduction of Rs.40,000 per year.
  • For the financial year 2018-19, a standard deduction of up to Rs.40,000 has been proposed for pensioners and salaried professionals. The amount is in lieu of travel, medical costs reimbursement and any other proposed allowances.
  • A salaried employee working for a company either is eligible to receive a fixed medical allowance or is entitled a reimbursement by the company.

Read Also: Quick Insights on Calculating Income Tax on Your Interest Income

How to claim the benefits?

The only condition for claiming the deduction is to provide the certificate of the diseases that you or any other eligible members may suffer from. You can obtain the same from a specialist medical officer. He/she should be practicing at a private or public hospital from where you availed the medical services.

The medical specialist should also possess a degree in which he claims to have the specializations. The Medical Council of India must approve the degree.

However, the medical expenses’ deduction can’t be claimed if an insurance company does your reimbursement.

However, if the reimbursement done by the insurance agency is lower than the actual costs, you can claim a tax deduction for the remaining amount.

If you are a salaried employee and wish to claim income tax deductions, you are now aware of what you can claim and how. If you are still unsure, you can contact a known income tax expert to help you out. All the best!