Here’s how…
Under the Indian Income Tax Act, medical allowances are considered as a tax-free component of an employee's salary. This means that if you receive medical allowances as a part of your salary, you can use it to reduce your taxable income and thus reduce the TDS (tax deducted at source) on your salary.
Here are the steps you can follow to use medical allowance to reduce TDS on your salary:
Check your salary structure: Make sure that your employer is providing medical allowance as a part of your salary. The maximum amount of tax-free medical allowance that can be provided is Rs. 15,000 per year.
Under section 80D. To claim the tax exemption, you need to provide medical bills to your employer to the extent of the medical allowance provided.
This means that if you receive Rs. 15,000 as medical allowance, you need to submit medical bills of at least Rs. 15,000 to claim the exemption. Otherwise, 30% of ₹15,000 will be considered taxable. However, if you file tax returns, you can reclaim 30% of the amount.
Declare medical expenses: While filing your income tax return, you need to declare the medical expenses you have incurred during the year. This can be done by submitting a medical reimbursement claim to your employer or by providing details of the expenses in the income tax return FORM - MRC (S).
Claim tax exemption: The tax exemption on medical allowance will be allowed to the extent of the actual amount spent on medical expenses or the amount of medical allowance provided by your employer, whichever is lower. The remaining amount will be considered as a taxable income and TDS will be deducted accordingly.
Start following these options and use your medical allowance to reduce TDS on your salary and thus save on your income tax liability. It is important to note that the medical bills and expenses should be genuine and incurred for medical treatment of self or family members to claim the tax exemption.
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