In our daily hustle, taxes might feel like a constant drain on our income. However, we ignore the positive side of it, which is worth exploring - tax breaks on health care expenses for you, your family, and your dependents. The Income-tax Act provides various provisions that can significantly alleviate the financial burden of medical costs.

Options to optimize your tax savings while prioritizing health care needs

Expenses on health Insurance incurred by Employer

Any portion of the premium paid by an employer for health insurance of an employee or any amount reimbursed by the employer in respect of any premium paid by the employee to effect or keep in force an insurance on-

• his health, or
• the health of any member of his family

under any scheme approved by the Central Government or the IRDA for the purposes of section 80D shall not be considered as perquisite and accordingly, not be included in the “salary” for the purpose of charging income-tax.

Medical expenses incurred by the Employer

The medical expenditure incurred or reimbursed by the employer in respect of an employe or any member of the employee's family, as under, shall not be considered part of the salary for charging income-tax:-

• Any medical treatment provided in a hospital run by the employer;
• any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in a Government Hospital, a hospital of local authority, any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees, such as CGHS approved hospitals;
• any expenditure incurred by the employee on his medical treatment or treatment of any member of his family in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner or the Principal Chief Commissioner
• in respect of any money spent by the employee on his medical treatment or treatment of any member of his/her family in respect of any illness relating to COVID-19 subject to fulfilment of specified conditions.
• any expenditure incurred by the employer in respect of any expenditure actually incurred by the employee outside India and stay abroad –
  • on his medical treatment or
  • treatment of any member of his family

Health Insurance and Medical Expenses incurred by Individual

Under Section-80D, the deduction from the Gross Total Income is allowable in respect of the following expenses incurred by an Individual under the Old Tax Regime-

For the Individual, spouse and dependent children

• The amount incurred for the health insurance of an individual and his family up to Rs 25,000/-, if there are no expenses or preventive health checkups (which are allowable up to Rs 5,000/- within the above limit) and none of the family members are senior citizens. In case the the health insurance is for a senior citizen, eligibility of deduction will be Rs 50,000/- instead of Rs 25,000/-, or
• The amount incurred on medical expenditure incurred upto Rs 50,000/-, if the expenditure include the expense in respect of a senior citizen family member in respect of which no expenses have been incurred on health insurance.

For parent of the individual,

• The amount paid for the health insurance of parents upto Rs 25,000/-, if there are no expenses on preventive health checkups (which is allowable upto Rs 5,000/- within the above limit), or
• The amount paid on medical expenditure incurred upto Rs 50,000/-, if the expenditure includes a parent who is a senior citizen and in respect of which no expenses have been incurred on health insurance

Preventive Health Check up

For preventive health check-ups, the deduction up to Rs 5,000/- is allowed within the overall limit discussed above; however, in a case where the payment for health insurance is in a lump sum for more than a year, the proportionate deduction is for the relevant years.

Expenses on maintenance and medical treatment of a dependent with a disability.

Where a resident individual during the previous year has incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependent, being a person with disability

• Such an individual is eligible for a deduction under Section 80DD of Rs 75,000/-; however, where such a dependent is a person with a severe disability, the deduction is permissible up to Rs 1,50,000/- subject to the fulfilment of the conditions prescribed.

Deduction in respect of medical treatment, etc.

Where a resident individual, during the previous year, actually paid any amount for the medical treatment of prescribed disease or ailment for himself or the spouse, children, parents, brothers and sisters of the individual, if any of them is wholly or mainly dependent on such individual for his support and maintenance, he shall be eligible for deduction of lower of the following :-

• amount actually paid, or
• Rs 40,000/- (in the case of senior citizens, Rs. 1,00,000/-)

Conclusion

Getting through tax laws can be complex, but understanding the avenues for tax savings on health care expenses can significantly ease financial burdens. By taking advantage of employer- sponsored benefits and individual deductions, you can ensure comprehensive coverage for yourself, your family, and dependents while optimizing your tax savings.

Remember, prioritizing health is important, and these tax-saving options serve as an added incentive to invest in well-being.

[ Disclaimer- The article is only for educational purposes, covering limited aspects of relevant provisions of the Income-tax Act. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.]