Medical bills and Tax

I have seen many people forge medical bills for the tax benefit. I know it is not right but many people do it for the obvious reason to save tax. I don’t know how far it is going to save their penny. I did little math out of it and this is what I have figured it out.

Consider that one earns more than Rs. 5 Lakh say Rs. 7 Lakh and he wants to get the tax benefit of Rs. 15,000 that the government provides for medical expenses. As you are aware, income more than Rs. 5 Lakh attracts a tax of 30%. In our scenario a person with Rs. 7 Lakh will have to pay a tax of :

Upto 1.5 Lakh – Nil, 1.5L – 3L – 10%, 3L – 5L – 20%, more than 5L – 30%. In our scenario a male has to pay (for female till 1.8L it is nil): First 1.5L – Nil, 1.5L – 3L =15K (10% of 1.5L), 3L- 5L =40K(20% of 2L), 5L – 7L =60K(30% of 2L). Total tax is 1.15L.

By forging the bills how much is one saving?

I will assume that he is in first bracket then he is saving nothing, in second bracket he is saving 1500, in third bracket he is saving 3000, in the final bracket he is saving 5,550. If you are in the third bracket then it makes sense to get the bills forged. (I know it is unethical but who cares!!!)

To get a forged bill, one has to pay 5% – 10% of the bill amount i.e. if you want a bill for Rs. 15,000 you need to shell out close to 750 – 1500 bucks. If you are in second or third it does not make any sense or does it? Given a choice to me, I won’t be doing that. It does not somehow make sense to me. If your income lies in the final bracket then you will save upto Rs. 4,050.

Think before you get your bills. I feel it is not ethical and also beneficial for you to do it for monetary gains.

Advertisements
Tagged

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: