Medical expense deductions need to be supported by evidence

My father (80 years old) suffers from Parkinson’s disease (advanced stage). He is under treatment of a neurologist. He is totally dependent on me. 

1. I have to come to know that certain deductions are available in income tax. As my father is above 80 years, he falls under the category of super senior citizen. The deduction amount allowed under this category is Rs80,000. If the amount spent is more than Rs80,000 or less, how much amount can be claimed as deduction—Rs80,000 or the amount actually spent? I have a certificate issued by the neurologist stating the stage of the disease. When filing the income tax return, do I have to submit this in original? Which other documents will I have to submit? 

2. Apart from Parkinson’s disease, my father suffers from various other ailments stomach pain and weak vision. Can I claim the cost incurred in treatment of these other ailments from the company-provided health insurance scheme? My father is covered under the scheme. I have not claimed any amount from the company-provided health insurance scheme from April 2016 till date.

—Subir Basu

Assuming you are a resident taxpayer, you can claim a tax deduction in respect of expenses on medical treatment of specified ailments (including Parkinson’s disease) for a parent, wholly or mainly dependent on you for support and maintenance.

Since your father is aged above 80 years, you can claim a tax deduction of the actual expenditure incurred, subject to an upper cap of Rs80,000, on the medical treatment. 

The medical expenses incurred will need to be supported by a prescription from a neurologist and the extent of or the type of disability has to be certified by the specialist as prescribed. Evidence of the medical expenditure incurred and the prescription or certificate from the specialist could be submitted by you to your employer in order to claim the deduction from taxable salary.

If you can claim the expenses incurred for the medical treatment of your father’s Parkinson’s disease from your insurer, the amount received from your insurer has to be deducted and only the balance, if any, can be claimed under section 80DDB of the income-tax Act.

You will need to examine the terms and conditions of your employer-provided insurance policy to evaluate if you can submit insurance claims in respect of other medical expenses incurred by you for your father. In case these are not covered under the insurance policy and your employer allows you reimbursement of such medical expenses, such reimbursement would not be treated as taxable to the extent it does not exceed Rs15,000 per financial year.

I have been working for 4 years in my organization. I am now moving abroad for a few years. Should I withdraw my provident fund (PF) amount—as I have read that tax will be deducted on it if I withdraw it before 5 years? Is it true that for 3 years, this account will earn interest? After 3 years of non-contribution, this account will be inactive; so can I use the same account once I come back to India and join some other organisation here? Or will I have to open another PF account on my return to India? If I don’t use the existing account, and I decide to withdraw the amount, say, after 5 years, will there be any tax deduction?

—Kavita Dalmia

We presume that you are an Indian citizen and hold an Indian passport. Under the current PF laws, you are eligible to withdraw your PF balances if you are moving out of India to take up employment or to settle abroad permanently. 

The PF withdrawn is taxable in India if PF contributions have not been made into your account for at least 5 years. The period of 5 years specified for this purpose is for the service period while employed and merely retaining balances in the account for a 5-year period will not qualify for seeking an exemption from income tax. In counting the 5-year period, your PF contributions with a prior employer would also be counted if you have transferred the PF balance from your previous to your current PF account. 

Your PF account would become inoperative if no contributions are made into the account for at least 36 months from the date you move abroad permanently. Until such time, interest will continue to accrue on the PF balances.

If you are able to establish that you are moving abroad only for a limited period of time (for example, by way of your overseas assignment letter or fixed term employment contract), then a view may be taken that your PF account balance would continue to earn interest after 36 months of non-contributions as well.

The introduction of a Universal Account Number (UAN) by the PF authorities has made it easier for you to link a new PF account with the old PF account and consolidate balances into one PF account by transferring the balances into a new PF account. 

Parizad Sirwalla is partner (tax), KPMG.

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