Savings and Income Tax Tips for Healthcare Professionals in India: A Know-How

 

 

Healthcare professionals have been tuned to patient care, upskilling, and networking since their days in med school. Whether you are a doctor, a dentist, a nurse, or an allied health professional, managing personal finances, particularly savings and income tax, with tax tips for healthcare professionals is equally essential for ensuring long-term financial stability. Indian healthcare today offers unique challenges and opportunities when it comes to building wealth and filing tax returns. 

 

Having discussed financial planning in healthcare in our previous articles on ‘Financial Management in Healthcare—The Doctor’s Journey’ and ‘How to Build Wealth in Healthcare as a Clinician?’, today we take a step further to learn the nuances of income tax benefits for doctors, tax exemptions, and more, to help you optimize savings and manage income tax effectively while leveraging the guidance of the best financial advisors in healthcare.

 

 

Taxes for Professionals in Healthcare

For professionals, taxes in healthcare depend on whether you are a salaried employee or running a hospital or private practice. Here is an overview of the types of taxes for professionals in healthcare.

 

Sources of Income:

 

Salary Income: Professionals employed by hospitals, medical institutions, or corporate health centers earn a fixed salary. This salary is subject to tax based on income tax slabs.

Professional Fees: Professionals who engage in private practice or consultancy services. Fees earned from such professional activities are also taxable under the "Income from Profession" category.

Other Income: Healthcare professionals might also have income from other sources, such as house business (running a hospital), property, investments (interest, dividends), or side businesses.

 

For those running a healthcare business:

 

Sole Proprietorship/Partnership: If the hospital or clinic is run as a sole proprietorship or partnership, the income is taxed according to the individual tax slabs applicable to the owner(s).

 

Private Limited Company: If the entity is registered as a private limited company, corporate tax rates apply. Currently, the corporate tax rate is 25% for companies with a turnover of up to ₹400 crore.

 

Presumptive Taxation (for Small Clinics/Hospitals): Introduced in 2016-17, PTS is available to individual doctors and members of Hindu Undivided Families (HUFs), this ensures income tax benefits for doctors and easier filing. Clinics or hospitals with an annual turnover of less than ₹50 lakh can opt for presumptive taxation, where 50% of the total revenue is taxable.

 

Goods and Services Tax (GST): Healthcare services provided by hospitals or clinics are generally exempt from GST. However, non-essential services such as cosmetic procedures may be subject to an 18% GST.

 

Professional Tax: In certain states, healthcare professionals like doctors are required to pay professional tax. The amount varies by state but is usually capped at ₹2,500 per year.

 

TDS (Tax Deducted at Source): Hospitals are also responsible for deducting TDS on payments such as salaries, rent, and contractor or 

 

 

Tax Tips for Healthcare Professionals

 

Here are the top 5 best practices for tax benefits for healthcare professionals:

 

1. Leverage the Presumptive Taxation

The Presumptive Tax Scheme has several benefits. It eliminates the need to maintain thorough financial records and appoint a Chartered Accountant for audits. Likewise, advance tax payments in installments are not necessary and voiding penalties under Section 271B of the Income Tax Act can result in savings of up to ₹20,000 in audit fees. When calculating gross receipts under this system, only income from your medical practice is taken into account; earnings from activities such as delivering lectures or publishing papers are not included in your total income.

 

2. Understand the key exemptions and savings.

 

Section 80C: Investment and Savings

 

Professionals can leverage this to reduce taxable income by up to ₹1.5 lakh per financial year through investments like:

 

• Employee Provident Fund (EPF): For healthcare professionals employed in hospitals or healthcare institutions.

• Public Provident Fund (PPF): A government-backed savings scheme with tax-free returns and a 15-year term, ideal for long-term investments.

• National Savings Certificates (NSC): Fixed-income investment schemes that provide tax breaks and guaranteed returns.

• Life Insurance Premiums: Premiums paid for life insurance policies, including those for healthcare clinicians or their families, are eligible for deduction.

• 5-Year Bank Fixed Deposits: Banks offer tax-saving fixed deposits with a five-year lock-in period.

 

Section 80D: Health Insurance Premiums

 

Healthcare professionals can claim deductions under Section 80D for premiums paid toward health insurance:

 

• Up to ₹25,000 for self, spouse, and dependent children.

• An additional ₹25,000 (or ₹50,000 if the parents are senior citizens) on premiums for parents.

• Preventive health checkups up to ₹5,000 are also included in this limit.

 

Section 80E: Interest on Education Loans

 

Healthcare professionals who have taken education loans to pursue medical or healthcare degrees can claim deductions under Section 80E on the interest paid on such loans. This deduction is available for eight consecutive years starting from the year the interest payment begins.

 

Section 80G: Donations

 

Healthcare professionals who donate to charitable institutions, especially those focused on health, education, or social welfare, can claim deductions under Section 80G.

 

3. Plan your business strategies better.

It is critical to choose between proprietorship, partnership, or company depending on your financial status and vision to expand your business. 

 

Investing in and recording capital expenditures like equipment and building renovations can help avail depreciation benefits, with higher rates of up to 40% reducing taxable income.

 

Record-keeping is a must. This includes a cashbook that records daily cash transactions, while the journal logs accounting transactions. A ledger to record entries from the journal for financial statements. Bill copies are issued for amounts over INR 25, original bills are receipts for expenditures over INR 50, and signed payment vouchers if invoices or receipts for expenses under INR 50 are absent.

 

Hiring on-call consultants or contractual locum employees instead of full-time employees reduced the burden of payroll taxes.

 

Losses incurred in the early years of a hospital or clinic can be carried forward and deducted from future profits for up to eight years, lowering tax liability.

 

4. Participate in R&D

Under Section 35 of the Income Tax Act, if you, as a healthcare professional or your organization, participate in studies, clinical trials, R&D of HealthTech, and industry surveys, then you can claim deductions for research expenses. 

 

5. Use professional tax advice.

The finance industry offers advisors and tax consultants who specialize in finances, tax tips for healthcare professionals, and building wealth in healthcare. They are instrumental in navigating complex tax laws, claiming deductions, optimizing payments, and assisting with tax planning, audits, and appeals if necessary. They help perform regular audits, bookkeeping, and regulatory compliance to detect opportunities to optimize tax returns.

 

 

Financial Advice in Healthcare With Anastomos

When a healthcare professional starts a business, he is not only a clinician; he is an entrepreneur. Merely focussing on patient care and upskilling is not enough.  

 

Precisely why, Anastomos, India’s first healthcare providers’ network, has a uniquely crafted Marketplace—a repository of the finest vendors in healthcare, including the best business consultant financial services, specializing in healthcare. The CA Kavita Gandhi organization has joined us to improvise on the tax benefits for healthcare professionals.

 

The firm exclusively deals in hospital finances and aims to reinforce a robust finance plan aligned with the business’ growth objectives and profitability. To avail of personalized consultations at the best prices, reach out to her through ANASTOMOS.