Clause 128 Deduction in respect of medical treatment, etc.

Income Tax Bill, 2025

1. Introduction

Clause 128 of the Income Tax Bill, 2025, introduces a deduction for medical treatment expenses incurred by an assessee who is a resident in India. This provision is designed to alleviate the financial burden associated with medical care for specified diseases or ailments. The clause aims to provide tax relief for individuals and Hindu Undivided Families (HUFs) by allowing deductions from taxable income for medical expenses. This commentary will explore the objectives, detailed provisions, and implications of Clause 128, and compare it with existing Section 80DDB of the Income-tax Act 1961, and Rule 11DD of the Income-tax Rules 1962.

2. Objective and Purpose

The legislative intent behind Clause 128 is to offer financial relief to taxpayers who incur significant medical expenses. By allowing deductions for specified medical treatments, the provision aims to make healthcare more affordable for residents, especially those dealing with chronic or severe ailments. This aligns with broader policy considerations to improve public health and reduce the economic burden on individuals and families.

3. Detailed Analysis

3.1 Key Provisions of Clause 128 of the Income Tax Bill, 2025

• Deduction Limits: Clause 128(1) permits a deduction of the actual amount paid for medical treatment or INR 40,000, whichever is lesser. This mirrors the structure of existing provisions, maintaining a cap to prevent excessive deductions that could significantly reduce taxable income.
• Eligible Beneficiaries: The clause applies to individuals and HUFs, allowing deductions for medical expenses incurred for oneself or dependants. This is consistent with the scope of existing provisions, ensuring that both personal and familial healthcare needs are addressed.
• Specialist Prescription Requirement: Clause 128(2) mandates obtaining a prescription from specified medical specialists, which ensures that deductions are claimed only for genuine medical expenses. This requirement is crucial for maintaining the integrity of the deduction process and preventing fraudulent claims.
• Insurance and Employer Reimbursements: The deduction is reduced by any amount received under insurance or employer reimbursements, as stipulated in Clause 128(3). This prevents double benefits and ensures that deductions reflect out-of-pocket expenses.
• Senior Citizen Benefits: For senior citizens, the deduction limit is increased to INR 1,00,000, as per Clause 128(4). This provision acknowledges the higher healthcare costs typically associated with aging and aligns with social welfare objectives.
• Definitions: Clause 128(5) defines key terms such as "dependant" and "insurer," ensuring clarity and consistency in interpretation. These definitions are crucial for determining eligibility and scope of deductions.

3.2 Comparison with Section 80DDB of the Income-tax Act 1961 & Rule 11DD of the Income-tax Rules 1962

Section 80DDB of the Income Tax Act, 1961, serves a similar purpose by allowing deductions for medical treatment of specified diseases. Both provisions share core elements, such as eligibility criteria, deduction limits, and prescription requirements. However, there are notable differences:

• Age Definition for Senior Citizens: Section 80DDB defines senior citizens as individuals aged 60 or above, while Clause 128 does not explicitly define this term, relying on the broader context of the Act.
• Specified Diseases: Section 80DDB refers to diseases specified in rules, whereas Clause 128 does not explicitly list diseases within the clause, likely deferring to future rules or notifications.
• Documentation Requirements: Section 80DDB previously required a certificate from a government hospital, a requirement omitted in Clause 128, simplifying compliance for taxpayers.

Rule 11DD specifies the diseases eligible for deductions u/s 80DDB and outlines the qualifications for issuing specialists. The rule provides a comprehensive list of ailments and the required disability level for neurological diseases. Clause 128, while not detailing diseases within its text, is expected to align with Rule 11DD in practice:

• Specified Diseases and Specialists: Rule 11DD provides a detailed list of diseases and the required specialist qualifications, ensuring that only genuine and serious ailments qualify for deductions.
• Prescription Details: Rule 11DD requires prescriptions to include detailed information about the patient and the specialist, a level of detail not explicitly mandated in Clause 128.

4. Practical Implications

Clause 128 is likely to have significant implications for taxpayers and healthcare providers. For taxpayers, the provision offers a financial incentive to seek necessary medical treatment without undue financial strain. However, the requirement for specialist prescriptions may limit access for those in areas with limited medical infrastructure. For healthcare providers, the clause could increase demand for specialist consultations, necessitating adjustments in service delivery.

5. Comparative Analysis with Other Jurisdictions

Comparing Clause 128 with similar provisions in other jurisdictions reveals common themes of providing tax relief for medical expenses. However, the specifics of eligible diseases, deduction limits, and documentation requirements vary, reflecting different healthcare systems and policy priorities. Unique features of Clause 128 include its focus on specialist prescriptions and its integration with existing insurance frameworks.

6. Conclusion

Clause 128 of the Income Tax Bill, 2025, represents a targeted approach to easing the financial burden of medical expenses for residents of India. By aligning closely with existing provisions and rules, it ensures continuity and consistency in tax relief for medical treatment. Future developments may focus on clarifying disease specifications and enhancing access to required medical specialists, ensuring the provision's effectiveness and accessibility.

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Full Text:

Clause 128 Deduction in respect of medical treatment, etc.

Medical expense deduction for specified diseases allows capped relief with specialist prescriptions and insurer offset. Clause 128 permits residents, including individuals and HUFs, to deduct out-of-pocket medical treatment expenses for specified diseases subject to prescribed monetary caps, requires prescriptions from specified medical specialists, reduces deductions by amounts reimbursed by insurers or employers, provides an increased cap for senior citizens, and defines key terms such as dependant and insurer; the clause aligns with Section 80DDB and Rule 11DD while simplifying certain documentation requirements and deferring disease enumeration to rules or notifications.