TAX TALK-16.01.2017-THE HITAVADA
CA. NARESH JAKHOTIA
Medical expense on cancer & tax deduction
One of my relative is suffering from cancer and getting himself treated from a private hospital. I want to know whether he would be able to avail the deduction u/s 80 DDB and up to what limit and what are the requirements? If he can avail the deduction then how he can get the counter signature of the head of Govt. Hospital as he is getting treated from private hospital? Please advice. [firstname.lastname@example.org]
Medical expenses have become an integral part & parcel of life. Income tax Act carries a human touch & offer tax benefit towards medical expenses of specified diseases/ ailments by way of deduction u/s 80DDB, as under:
- Deduction is available for medical expenses incurred on medical treatment of specified diseases or ailment as prescribed by the board. (Malignant cancer is a prescribed disease for the purpose of section 80DDB). Deduction is available to resident individual taxpayers on the amount actually incurred for the medical treatment of self or wholly/mainly dependent spouse, children, parents, brothers and sisters of the individual. Deduction can be claimed by HUF if the amount is incurred for the medical treatment of the any members of the family who is wholly/mainly dependent upon the family. Deduction admissible is lower of Rs. 40,000/- or amount actually incurred. However, in case of treatment of senior citizen, deduction admissible could be up to Rs. 60,000/-. Moreover, in case of super senior citizen (80 years and more), deduction is enhanced to Rs. 80,000/- from AY 2016-17. [Deduction u/s 80DDB would be reduced by the amount received, if any, under insurance from an insurer or reimbursed by an employer for the medical treatment of the person referred above].
- To claim deduction, taxpayer have to obtain the certificate in prescribed from (Form No. 10-I) from a neurologist, an oncologist, a urologist, a hematologist, an immunologist or such other specialist as may be prescribed working in a Government hospital. Realizing the problem that is faced by the taxpayer, the condition for obtaining the certificate from Government hospital is now waived from the A.Y. 2016-17. Now, the taxpayer is just required to obtain a prescription from a specialist doctor (need not be working with Government hospital) for the purpose of availing this deduction. In your specific case, certificate of a specialist doctor working in a private hospital would also be in accordance with the requirements of section 80DDB.
I am a Maharashtra State Government Officer. My annual salary is Rs. 6.00 Lakh, on which I have already paid income tax as TDS @ 20% on my salary. During this year out of my saving from the salary of Rs. 6.00 Lakh, I had spent Rs. 1.15 Lakh on my mother Bone replacement operation in Pune. The hospital in which the operation is done is not in the approved list of the State Government. The aforesaid amount of Rs. 1.15 Lakh I have claimed under State government Medical reimbursement rule 1961. Now my question is,
- Whether the said claimed amount of Rs. 1.15 Lakh is taxable?
- Whether it would be treated as my salary income?
- I have already paid TDS on my total amount of salary of Rs. 6.00 Lakh and the said reimbursement claimed is out of my salary saving; Our DDO is saying that Government have paid me total of Rs. 7.15 Lakh ( 6.00 lacs as Salary and Rs. 1.15 Lakh as Medical reimbursement). So, I am liable to paid Tax on total amount of Rs. 7.15 Lakh. Isn't it would be double taxation? Because, I have already paid TDS on the amount of Rs. 1.15 Lakh and I have not received any additional income. Please guide me in this regards. [email@example.com]
In normal course, unless and until specific exemption/deduction is provided, any amount /reimbursement / allowance received by an employee from an employer is taxable as “Salary Income”. However, there is a specific provision with regard to taxability of medical benefit provided or reimbursed by employer to employee, as under:
- Fixed medical allowance is taxable whereas medical reimbursement is tax free subject to a maximum of Rs. 15,000/- per annum. Further, exemption is available not only against an expense incurred for his own medical treatment but also for the treatment of (a) spouse (b) children & (c) dependent parents/brothers & sisters of the employee. If employer reimburse more than Rs.15,000/- in a year against medical bills, amount exceeding Rs.15,000/- would be taxable in the hands of the employee.
- In addition to tax free reimbursement of medical expense up to Rs. 15,000/- as explained above, following are also tax free & no income tax is payable in such cases:
- The value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer.
- Medical reimbursement provided by an employer to an employee for the medical treatment of self or family members in any hospital maintained by the Government or Local authority or in a hospital approved by the Government for treatment of its employees.
- Medical reimbursement provided by an employer to an employee for medical treatment of self or any of his family member’s in respect of prescribed disease or ailment as prescribed in Rule 3A of the Income Tax Rules in any hospital approved by the Chief Commissioner of Income Tax. However, in such case, an employee has to obtain a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital.
- Any portion of the Insurance premium paid by the employer for insurance and health of the employee under scheme approved the General Insurance Company.
- Any reimbursement by the employer of any insurance premium paid by the employee for an insurance for his health or the health of any member of his family under a scheme approved by the General Insurance Corporation of India for the purpose of Section 80D.
Tax implication on amount reimbursed for treatment in a private hospital:
An employee sometimes get the treatment at a private hospital and not necessarily at a hospital maintained by the Government or any local authority, which may not be approved for the medical treatment of employees of the Government. If such Private Hospital is approved by the Chief Commissioner of Income Tax, having regard to the prescribed guidelines for the purposes of medical treatment, any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of prescribed disease/ailment (prescribed under Rule 3A) would be totally exempt from income tax. Hence, employee or a member of his family getting treatment in a private hospital need to ensure that it is approved by the Chief Commissioner in order to save tax. Employee should properly keep the documents from the hospital specifying the disease and the amount paid to the hospital. Diseases prescribed by Rule 3A are cancer, tuberculosis, AIDS, disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation etc
[Even if employees are not eligible for exemption as discussed above, they can still explore the possibility of claiming deduction u/s 80DDB for the medical expenditure incurred on the certain specified diseases or ailment, as prescribed by the board. However, expenditure on all the ailments /diseases is not eligible but only few specified disease like cancer, chronic renal failure, hematological disorders etc offers deduction u/s 80DDB).
In your specific case, even if the hospital is not in the approved list of State Government, deduction would be available if it is approved by the Chief Commissioner. If it not in the approved list then the amount reimbursed by the employer would be taxable.
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at firstname.lastname@example.org].