Using Medical Bills


A normal city dweller on an average spends a sizeable amount of his salary on medical treatment of himself and his dependant family members. The Income Tax Act, 1961 has recognized the need to provide some exemptions and deductions in this context.

Almost all companies have some scheme of medical benefits to their employees. It can take the form of undertaking treatment in one’s own hospital, reimbursement of bills paid by the employee or giving a fixed allowance per month for medical expenses.

Any Medical Allowance given by the employer is fully taxable in the hands of the employee irrespective of the expenses incurred by him.

The following expenses incurred by the employer in India is considered tax free in the hands of employee:

The value of medical treatment provided to the employee or his relatives in a hospital maintained by the employer

Reimbursement of actual expenditure incurred by the employee on his or his relative’s medical treatment

>> in a hospital maintained by Government, local authority or approved under any scheme of Central or State Government.
>> in any hospital approved by Chief Commissioner for the treatment of specified diseases under Rule 3A. In this case the employee has to attach with      the return of income a certificate from the hospital specifying the disease and a receipt of the amount paid to the hospital.

Group medical insurance premium paid by the employer for his employees or reimbursement of medical insurance premium paid by the employee      on his health or on the health of any member of his family.

Reimbursement of medical expenses incurred by the employee for himself or his family members to the extent of Rs. 15000. This expense can be      incurred in any hospital and for any ailment or disease.

Where the medical treatment is given to the employee or a member of his family outside India, the following expenses incurred by the employer shall be tax free:

expenditure on medical treatment to the extent permitted by Reserve Bank of India.

Travel and stay abroad of the patient and one attendant for such medical treatment provided the employee’s salary excluding such taxable travel      expenditure does not exceed Rs. 200,000. Where his salary exceeds Rs. 200000, the travel and stay expenditure shall be taxable.

Tax Planning

It is always advisable for the employee to treat his medical allowance as a medical reimbursement as it is tax free. Wherever certificate has to be obtained he should do so to obtain the tax benefits. In addition to the tax free medical expenses he should also look into availing deductions which are offered under the Income tax Act, 1961 for such medical expenses.

Tax benefits on Mediclaim policy

The Income tax Act provides for various deductions for medical expenses incurred by a taxpayer. One such deduction is for the premium paid on the medical insurance policy popularly known as the ‘Mediclaim Policy’ under Section 80D of the Act.

A Mediclaim Policy provides for reimbursement of expenses incurred for hospitalisation/ domiciliary hospitalisation (medical treatment at home for a period exceeding 3 days) in India for the treatment of any illness or disease as specified in the policy.

The premium paid on a medical insurance policy taken by an individual for his own health or for the health of his spouse, dependent parents or dependent children is eligible for deduction. An HUF is also eligible for such deduction on premium paid for family members.

Deduction Amount

The amount of deduction is the actual premium paid or Rs.10,000, whichever is less. If the premium is paid on the medical policy taken for the benefit of a senior citizen, being the tax payer or any other family member, then the amount of deduction can be claimed up to Rs.15,000.

The following conditions will have to be satisfied to claim the deduction:

The insurance scheme should be in accordance with schemes framed by General Insurance Corporation and approved     by the Central Govt. or any      other approved insurer.
 The premium has to be paid by cheque to claim deduction.
 Such sum will have to be paid out of the income chargeable to tax. This means that if the premium is paid out of     salary income or any other income     chargeable to tax, then the deduction is available. Whereas if it is paid out of     agricultural income (exempt from tax), then such premium is not      eligible for deduction on the non agricultural income.

Features

The Mediclaim policy offered by the four companies namely, The National Insurance Company, The Oriental Insurance Company, The New India Assurance Company and United India Insurance of the GIC are almost the same in terms of the conditions and other policy norms.

The minimum sum that can be insured for is Rs.15,000 and the maximum sum is Rs.5 lakhs. The annual premium is based on the age of the person covered and the sum insured

by the policy. The policy can be taken for those aged between 5 and 80 years. Children between 3 months and 5 years can also be covered provided one or both the parents are covered concurrently

The sum insured progressively gets increased by 5% for each claim free year of insurance. Such increase is allowed for 10 claim free years of insurance.

A preliminary notice of claim with particulars relating to the policy number, name of the insured, nature of the illness etc.should be given to the Insurance Company within seven days of hospitalisation and the final claim should be made within 30 days of the completion of treatment along with all necessary records.

By just paying a small sum as premium on a mediclaim policy every year, one can avoid huge medical expenses during unforeseen circumstances. And when such premium also carries tax benefits, then there is no reason to wait for anything better.

Deductions available for medical expenses


Medical Insurance Premium

Premium paid by cheque under any medical insurance scheme of the General Insurance Corporation approved by the Central Government or to any other approved insurer to the extent of Rs. 10000 or in case the insurance is on the health of a senior citizen, upto Rs.15000 shall be deductible. (Section 80D)

Maintenance and medical treatment of handicapped dependant

Under section 80DD an assessee is eligible to a deduction of Rs. 40000 on the expenses incurred on medical treatment of a handicapped or a mentally retarded dependant relative or on any amount paid to any scheme of LIC/ UTI / any other approved insurer for the maintenance of such relative. Flat deduction of Rs. 40000 or Rs 60000 (expense for a senior citizen) as the case may be, shall be available irrespective of the expenses.

Medical treatment for certain specified diseases

Under section 80DDB expenses incurred on medical treatment of certain specified diseases for either the assessee himself or his dependant relative shall be eligible for deduction. The assessee shall furnish a certificate from a registered Doctor in Form 10 I.

A flat deduction of Rs. 40000 shall be allowed irrespective of the expense incurred.

Where employer offers to bear his medical expenses for specified diseases the employee is still not prevented from availing deduction under section 80DD and 80DDB subject to satisfaction of conditions specified therein. It goes without saying that a lot of these benefits given for medical treatment under the Income Tax Act should be availed by the assessee and should be utilized to his utmost benefit.

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(Source :: sify.com)