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Medical Bills Tax Exemption

Medical Bills Tax Exemption for AY 2020 - 2021

Last Updated 21st Jun 2021

  • The tax exemption for medical bills is a clause under the income Tax Act of 1961.
  • The provisions under the Act enable salaried individuals as well as senior citizens to enjoy tax exemption for medical expenses.
  • The standard deduction limit as per this exemption is ₹ 40,000.
  • A salaried individual can make this claim, for himself, kids, spouse, dependent parents and siblings.
  • An assessee does not have to file for this while submitting his ITR rather has to submit for this claim in his respective firm.
INCOME TAX CALCULATOR

Medical Allowance

Health issues and medical costs are both increasing exponentially in the country. Thereby, people spent a significant chunk of their earnings on their regular medical expenses. Hence, to bring about some relief to the people from these ever-increasing medical costs, the Government of India has brought about certain regulations in the Income Tax Act of 1961 for medical bills tax exemption. The provisions made in the act will significantly diminish the tax obligations of individuals as it is offering certain exemptions and reductions on the payment of medical bills, premiums of health insurance and so on.

Certain firms offer medical allowance facilities to their workers every month. Usually, this allowance is a fixed amount that the firms provide to their workers. These medical allowances or reimbursements received by employees from their respective firms are not eligible for claiming tax deductions. Moreover, the reimbursement is subject to complete taxation as per the provisions of the ‘Income from Other Sources’ heading.

Reimbursement of Medical bills by Employer

The Income tax act provides various exemptions and deductions under the provisions of the Act. Such an exemption includes the expenditures related to medical bills and other relevant medical expenses borne by an individual in the current fiscal year. The medical expenses exemption is applicable for both, the costs of medical expenses of the individual himself and that of his dependents and family. However, in case an earning individual is already receiving medical allowances from his employer, then he will not be eligible to file for the medical bills exemption. There are few conditions that have to be met in order to file for the exemption and these are given below.

  • The exemption is only applicable when the medical expenditures are related to the individual himself, his spouse, kids or siblings or parents who are entirely dependent.
  • The medical bills tax exemption can only be filed when the medical expenses are related to medicines purchased from pharmacies or for the treatment of an illness carried out at a private or public hospital or in a clinic.
  • The individual has to file these medical expenses bills with the firm or employer where he works and not while submitting the income tax returns.
  • An individual can receive a standard tax deduction of ₹ 40,000 that can be claimed in one financial year in relation to the medical expenses and travel expenses of an individual.

From the financial year of 2018 to 2019, the standard deduction of ₹ 40,000 has been announced in terms of reimbursement of travel and medical expenses and other relevant allowances for pensioners and earning individuals. Claiming for the standard deduction does not require an individual to produce the medical bills to his firm.

Tax Deduction U/S 80D

According to the provisions of Tax Deduction U/S 80D, an individual can claim a deduction of ₹ 25,000 yearly for himself, children and spouse for medical insurance and ₹ 25,000 as medical insurance for parents irrespective of being dependent or otherwise. In order to make this claim, an individual needs to have medical insurance under any insurance company of his preference and pay the premium amount annually to make the claim. For senior citizen taxpayers, the senior citizen medical expenses tax exemption allowances are as high as ₹ 50,000 a year. Meaning a senior citizen can receive a maximum deduction of ₹ 50,000 for his medical insurance.

Tax Deduction U/S 80DDB for Medical expenses

In contemporary times that we live in, even the most minor surgery or consultation can be really expensive. To provide some relief, the Income Tax Act has regulated certain provisions that will enable salaried individuals to claim for medical bills exemption that can reduce their tax obligations.

Under the provisions of Tax Deduction U/S 80DDB for Medical Expenses, an earning individual can claim for tax deductions for their medical expenses that are either incurred by self, children, spouse or dependent siblings and parents. This deduction can be claimed by HUF members and residential Indian individuals for the current financial year.

Deduction Cap

The upper limit of the tax deductions for medical expenses including treatments and transport expenses is ₹ 40,000 for one financial year. The cap on the standard deduction is subject to change for different age groups. For salaried people below the age of sixty, the upper limit is ₹ 50,000. The senior citizen medical expenses tax exemption is capped at ₹ 75,000 for the present year. For people aged above 80 years, the tax deduction is capped at ₹ 1,00,000.

How to Claim the tax Benefit

You can follow the points given below to claim the tax benefit.

  • As per the provisions of section 80DDA, the assessee has to produce the certificate of the ailment suffered.
  • The assessee needs to obtain the certificate from the medical officer of the specific field, either practicing in a private or public hospital, who has treated the patient.
  • The medical officer must have his degree of specialisation.
  • The degree has to be validated by the Medical Council of India.

Thus, if you have the certificate from the medical officer under the above-mentioned conditions, then you will be eligible to file for the medical expenses exemption. However, it is important to note that, if you have already received the reimbursement from your respective insurance company you will no longer be eligible to claim the tax deduction. But if the insurance company reimburses only a partial amount of the medical bill, then you can file for a tax deduction claim for the outstanding amount, where the upper limit of the deduction remains the same.

Medical bill Reimbursement Rules

Former finance minister Mr. Arun Jaitley had announced the upper limit of ₹ 40,000 for tax exemption for medical expenses related to transport allowances and medical treatment. Whether a salaried or pensioned individual, you do not have to produce the medical bills or documents related to medical expenses to make the standard claim of ₹ 40,000. This provision was brought from the financial year of 2018 to 2019. Hence, there are no rules to claim the tax deduction, assessees are allowed to make the claim directly.

Medical Bill Reimbursement form

As the pensioners and salaried people can now make the claim directly hence there is no need to fill up a form anymore. But a few companies still ask their employees to submit the medical bills for reimbursement. Every company has its own form of reimbursement. Hence the format of the reimbursement form may vary from one firm to another.

FAQs

Can medical bills be claimed under 80d?

Medical bills can be claimed for tax deductions under section 80D of the Income-tax Act. According to the provisions of the act, medical expenses such as treatment bills and medical bills from pharmaceuticals along with travel allowances are eligible for tax deduction up to standard deduction of ₹ 40,000

How much medical bills can you claim on taxes?

The amount of money that can be claimed as reimbursement, depends on the age group. If you are a salaried individual below the age of 60, then you are applicable for medical reimbursement of ₹ 50,000. For senior citizens, the medical reimbursement can be of maximum ₹ 75,000 whereas for super senior citizens is capped at ₹ 1 Lakh.

Are medical bills tax deductible 2020?

The medical bills are applicable for tax deduction for the fiscal year 2019-2020 or for AY 2020 - 2021. Hence you can directly make a claim by filling up the tax deduction form for medical exemptions to your employer, if applicable. However, you can only make the claim if you have not claimed for it from your insurance company. However, if the insurance company has reimbursed a partial amount of the medical bill you can claim the rest from the tax deduction.

Can you claim medical expenses on income tax?

You can definitely claim medical expenses on income tax. However, if you already receive medical allowances from your respective firm, then you will not be eligible to claim the medical expenses on income tax. Moreover,it is important while claiming the tax that you are only eligible for a deduction of ₹ 40,000 on your medical bills.

How do you calculate medical expenses for taxes?

To calculate the medical expenses, gather all your documents and reports related to the medical expenses, including pharmaceutical bills and transport allowances. Calculate the entire amount, make sure it does not exceed ₹ 50,000 if you are a salaried individual. If your expenses are within the capped deduction then you will receive tax exemption for medical expenses.


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