Chapter-9 Special Provisions Relating to Natural person

50. Spouse

(1) Both a resident natural person and his or her resident husband or wife may, by giving a notice in writing, choose to be treated as one natural person in any specific income year for tax purposes.

(2) The husband or wife out of the spouses who choose the provision contained in sub-section (1) in respect of any income year shall be jointly and severally responsible between each other for the tax payable by them in that year.

(3) Notwithstanding anything contained in sub-sections (1) and (2), a resident widow or widower responsible for bearing dependents shall be deemed as a couple.

Under this Section, the following general conditions apply for opting as a couple: both husband and wife must be resident natural persons; both must give a notice in writing (information provided in the specified field in the income return form is also considered as having opted); the opt-in is for one income year only.

Couple assessment (Sec 50): a resident natural person and resident spouse may elect IN WRITING to be treated as ONE natural person for a given income year (the election applies for that one year only). Effect: combined income, a single set of slabs, the higher couple exemption limit, and one medical credit covering both. Both are jointly and severally liable for the tax. A resident widow/widower supporting dependants is also treated as a couple

51. Tax adjustment for medical treatment

(1) Any resident natural person may make a claim for adjustment of tax for medical treatment in any income year for the approved medical treatment expenditure incurred by himself or through any other person for himself.

A resident individual may claim a medical tax credit for approved medical treatment expenses incurred for themselves, whether paid personally or by another person (such as an employer). Medical expenses are not deductible from income; instead, after including any related benefits in income and calculating the tax liability, an eligible amount (subject to the prescribed limit) may be deducted directly from the tax payable. Where spouses elect for couple assessment, they are treated as a single individual, allowing either spouse to claim the credit for approved medical expenses incurred by both spouses.

Example 11.3.1: Suppose an employee of a company falls ill and receives medical treatment. Whether the medical treatment expenditure is paid by the employee personally or paid for by the company, the employee may claim the tax adjustment for medical treatment in both cases. However, where the company pays for the medical treatment, the adjustment is available only if the amount paid by the company has been included in the natural person's income.

When claiming the adjustment, the full amount of approved medical treatment expenditure incurred in any income year cannot be deducted from the tax payable. Only fifteen percent of the total approved medical treatment expenditure incurred, plus any unused amount carried forward from previous years, may be deducted.

(2) The tax adjustment amount for medical treatment of an natural person in any income year shall be computed also by adding any amount, if any, referred to in sub-section (4) to the amount to be set by fifteen percent of the approved medical treatment expenditure referred to in sub-section (1).

(3) Notwithstanding anything contained in sub-section (2), the amount of tax adjustment for medical treatment claimed by an natural person in any income year shall not exceed the prescribed limit.

Rule 17(3): The threshold of the amount for which tax can be adjusted pursuant to Sub-section (3) of Section 51 of the Act shall be One Thousand Five Hundred Rupees.

The tax adjustment for medical treatment is the least of:

(a) Rs. 1,500;

(b) the sum of the unused amount carried forward from prior years plus 15% of the current year's approved medical treatment expenditure; and

(c) the tax payable for the current year.

The above provision is clarified by the following example.

Example 11.3.3: Suppose an natural person had unused approved medical treatment adjustment of Rs. 500 carried forward from the prior year. If this year the natural person incurred approved medical treatment expenditure of Rs. 20,000, then 15% of Rs. 20,000 is Rs. 3,000, plus the balance carried forward of Rs. 500, giving a total claimable amount of Rs. 3,500. However, since Rule 17(3) caps the adjustment at Rs. 1,500 per year, the natural person may claim only Rs. 1,500 this year and must carry forward the remaining Rs. 2,000 to the following year.

(4) In the case of any natural person in any income year, the excess amounts as mentioned in clauses (a) and (b), up to the following limit, may be carried forward and included in the amount referred to in sub-section (2) in the forthcoming years:-

(a) Where the amount referred to in sub-section (2) exceeds the limit referred to in sub-section (3), the amount of such excess, and

Example 11.3.4: Suppose in any income year an natural person has approved medical treatment expenditure of Rs. 20,000. Then 15% of Rs. 20,000 is Rs. 3,000. The lesser of this and the annual deduction limit of Rs. 1,500 is Rs. 1,500, so the natural person may deduct Rs. 1,500 from the tax payable this year. The remaining Rs. 1,500 may be carried forward to reduce tax payable in the following year.

(b) The amount to the extent that the person referred to in clause (a) of Section 3 is not allowed to use tax adjustment for medical treatment because of the tax payable by that person in that year being less.

Example 11.3.5: Suppose in any income year an natural person has approved medical treatment expenditure of Rs. 4,000. Then 15% is Rs. 600, which may be deducted from the tax payable this year. However, if the tax payable for the year is only Rs. 500, the natural person may adjust Rs. 500 in that year and carry forward the excess of Rs. 100 to the following year.

Example 17.7.1: Suppose a person incurred Rs. 20,000 in approved medical expenses in one financial year. As per Section 51(2) of the Act, they can claim a tax credit at 15%, and since Rule 17(3) limits such expenses to Rs. 1,500, that person can deduct Rs. 1,500 from their tax liability for that year on the Rs. 20,000 x 15% = Rs. 3,000, and the remaining Rs. 1,500 can be claimed from tax liability in the following year. If their tax liability is less than Rs. 1,500, the remaining amount can be carried forward to the next year. The following table illustrates the medical tax credit provisions:

Explanation: For the purposes of this Section, "approved medical treatment expenditure" means the approved medical treatment expenditure as prescribed.

Rule 17(1): For purposes of computing tax adjustment for medical treatment pursuant to Section 51 of the Act, the following medical treatment expenses shall be deemed as the approved medical treatment expenses:

(a) …….

(b) the amount as per the bill including the expenses for medicines incurred in doing treatment of any natural person by a recognized hospital, nursing home, health centre or a doctor.

Rule 17(2): Notwithstanding anything contained in Sub-rule (1), the following expenses shall not be deemed as approved medical treatment expenses:

(a) the expenses incurred in cosmetic surgery; and

(b) the expenses mentioned in Sub-section (16) of Section 1 of Schedule-1 of the Act for which compensation has been obtained from insurance.

If an natural person has obtained health insurance and has received reimbursement or compensation for medical treatment expenditure under the terms of that insurance, the natural person cannot claim the tax adjustment for medical treatment for the amount received as compensation.

Example 11.3.6: Suppose Harihar Mathema has taken health insurance paying an annual premium of Rs. 15,000 to an insurance company. When computing employment income, the natural person may deduct the lesser of the insurance premium paid or Rs. 20,000 from taxable income, so the premium of Rs. 15,000 shall be deducted and tax shall apply only on the remaining balance. A resident natural person who deducts health insurance premium from taxable income cannot also claim the Rs. 1,500 tax adjustment for medical treatment expenditure.

Example 11.3.8: Suppose Bharat Kuswaha has a taxable income of Rs. 630,000 in FY 2080/81. He has chosen to be assessed as a couple for that year.In that income year, he incurred Rs. 6,000 for his own medical treatment and Rs. 8,000 for his spouse. Total approved medical expenses = Rs. 14,000. In the next year, FY 2081/82, his taxable income is Rs. 650,000, and he again opts to be treated as a couple. In that year, he incurred Rs. 10,000 medical expenses.

Now, the Medical Tax Credit calculation for both years is as follows:

Medical tax credit (Sec 51, Rule 17): a resident natural person may reduce TAX PAYABLE (not income) by the LEAST of:

(a) Rs. 1,500;

(b) 15% of approved medical expenses + any unused amount carried forward;

(c) the tax payable that year.

Approved expenses = hospital/nursing-home/clinic/doctor bills incl. medicine (NOT cosmetic surgery or insurance-reimbursed amounts). Unused excess carries forward indefinitely. A couple may claim for both spouses. Cannot be combined with the health-insurance premium deduction (up to Rs. 20,000)