This is a yearly phenomenon that happens at the end of every financial year. All kinds of financial service providers – right from banks to insurers to fund houses and now the likes of Paytm – start taking up space not just in our inboxes and messages but also hoardings all over the city pushing one thing: how you and me can save on tax by using their products.
Now, jumping on board the ‘milk the tax saving season’ bandwagon are medical diagnostic laboratories. Many renowned diagnostic centres have been sending SMSs and printing ads in newspapers telling people how they can save tax by undergoing a preventive health check-up from their centres. ‘Save tax and your health’ is the message these medical labs are spreading.
Sample this: a message from Thyrocare read: “Don’t tax your health, Don’t tax your wealth, preventive care check-ups save you and your tax. Book now,” with a hyperlink to its website. SRL Diagnostics has Bollywood actress, Shilpa Shetty, giving website visitors a thumbs up and coaxing them to save tax under section 80D with preventive health check-ups.
(The screesnshot from SRL Diagonstic website homepage)
(SMS from Thyrocare)
(SMS from Medlife)
Now that we have piqued your interest, we will get these three questions answered in this story: how you can save tax, how much tax can be saved and what you need to do to make sure your claim is eligible for deduction.
How can you save tax?
The medical labs and diagnostic centres are taking advantage of the fact that up to Rs 5,000 spent on ‘preventive health check-up’ can be claimed as a deduction from income before levy of tax as per Section 80D of the Income Tax Act. Using this as a USP, these labs are trying to get people to go for medical tests before the financial year end.
As per the law, an individual is allowed to claim tax deduction on the expenses incurred to undergo the preventive health check-up, irrespective of whether he is covered under a medical health insurance policy or not.
Abhishek Soni, CEO, tax2win.in, a tax-filing website says, “It is not necessary that the preventive health check-up must be done only on the individual himself/herself. If the preventive health check-up has been undertaken for family members, then, too, he is eligible to claim the deduction. Family member is defined as individual himself, spouse and dependent children as per the income tax law. If the individual has incurred some expenses on his/her parents for preventive health check-up, then also he/she can claim the deduction.”
What you need to do to make sure your claim is eligible for deduction?
“The Income Tax Act allows maximum deduction of Rs 5,000 for the amount spent on health check-ups. Do keep in mind that the deduction amount for preventive health-checkups comes under the overall ceiling of the health insurance premium paid”, says Soni .
An individual below the age of 60 years can claim the deduction of Rs 25,000 in a financial year for the health insurance premium paid for self, spouse and dependent children. For someone who is 60 years and above, the deduction amount of Rs 50,000 will be applicable. Additional deduction can be claimed for health insurance premiums paid for parents of Rs 25,000 or Rs 50,000 depending on their age.
Therefore, if you have paid health insurance premium of Rs 20,000, then you can claim deduction on preventive health check up to the maximum amount available. However, if the health insurance premium paid is Rs 23,000, then, deduction on preventive health check-up can be claimed for only Rs 2,000.
Deduction on preventive health check-up and health insurance premium
|Amount (In Rs)||Amount (In Rs)||Amount (In Rs)|
|Health insurance premium paid||20,000||23,000||25,000|
|Preventive Health Check-up deduction available||5,000||5000||5,000|
|Preventive Health Check-up deduction allowed||5,000||2,000||–|
|Maximum deduction under Section 80D||25,000||25,000||25,000|
(For individuals below 60 years of age)
Payment for preventive health check-up can be done in cash as well. This is unlike from the premium paid on health insurance policy. Under section 80D, the premium paid on health insurance policy has to be done through banking channels only.
How much tax can you save?
Though the amount of deduction available is for Rs 5,000, the amount of tax that you can save depends on the tax rate applicable to your income after claiming all the eligible deductions.
Here’s the amount of tax that you can save by simply claiming deduction on preventive health check-ups.
Preventive health check-up for family members and parents
|Income Tax Rates||Tax-savings (Rs)|
|5 per cent tax rate||250|
|20 per cent tax rate||1000|
|30 per cent tax rate||1500|
Tax-savings are exclusive of cess
It is important to remember that one must keep the documentary evidences such as doctor’s prescription, receipt of medical tests undergone and other documentary evidence in case the income tax department asks for proof.