India’s healthcare sector is at a turning point. With tax incentives for health startups and medical tourism on the rise, India is poised to become a global medical hub. A recent study by FHRAI and KPMG projects India’s medical tourism industry to grow from $18.2 billion in 2025 to $58.2 billion by 2035, backed by a 12.3% annual growth rate.
This vision requires more than doctors and hospitals — it needs strategic tax support, startup-friendly subsidies, and global patient-centric policies.
Why India is on the cusp of a medical boom
- India issued 4.6 lakh medical visas in 2024, led by patients from Bangladesh, GCC countries, and African nations.
- Ranked 10th in the global Medical Tourism Index, India’s affordability, quality of care, and English-speaking healthcare professionals are major draws.
- The global medical tourism market, currently at $41.75 billion, is expected to double by 2030, offering India a massive opportunity.
Tax incentives for health startups: What’s being proposed?
The FHRAI–KPMG report calls for specific tax and policy interventions to build momentum:
- Tax holidays for hospitals treating international patients.
- Weighted deductions for R&D by health-tech startups (similar to those under Section 35 of the Income-tax Act).
- Lower GST rates on medical devices, telemedicine tools, and AI diagnostic platforms.
- Startup subsidies for those developing cross-border insurance portability, digital patient record systems, and international accreditation modules.
- Customs duty exemptions on medical equipment used in treating foreign patients.
Legal and policy framework: What already exists?
Here’s how existing laws support this vision — and where the gaps lie:
| Policy Element | Current Status | Suggested Reform |
|---|---|---|
| Section 80-IAC (Startup Tax Holiday) | Limited to DPIIT-recognised startups, for 3 years | Expand scope to cover certified health-tech ventures |
| GST on health services | Exempt for domestic patients; taxable for foreign patients | Standardize GST input claims for hospitals treating both |
| Section 35 (R&D Deduction) | Weighted deduction removed in Budget 2020 | Reintroduce for health innovation |
| Foreign Direct Investment (FDI) | 100% automatic route in hospitals | Extend to digital health ventures with safeguards |
Expert View: The compliance edge
Dr. Alok Roy, Chairman, Medica Group of Hospitals, notes:
“India has the skills, talent, and infrastructure. What we need is coordinated policy — medical visa ease, tax certainty, and R&D support — to make ‘Heal in India’ globally competitive.”
From a tax consultant’s perspective, startups should pre-emptively structure their models to claim available deductions, maintain audit trails for R&D expenses, and explore international accreditation that may soon be eligible for fiscal benefits.
How “Heal in India” can be a compliance-driven success
For India to lead in global healthcare, the government’s support must be proactive:
- Launch a Heal in India Mission (as recommended) under the Ministry of Health, with DPIIT and CBDT coordination.
- Create a GST exemption/refund scheme for healthcare exports (akin to SEZ model).
- Build an international patient compliance framework covering income attribution, transfer pricing for group hospitals, and data-sharing with foreign insurers.
These steps can help India capture a larger share of the booming medical tourism market, while promoting compliant, transparent growth.
What health startups and hospitals should do now
- Register as DPIIT-recognised startups to be eligible for existing benefits under 80-IAC.
- Document R&D activities — even if deductions are currently limited, future policies may allow retrospective claims.
- Explore GST refund mechanisms if treating international patients.
- Collaborate with policy advocacy bodies like FICCI and NASSCOM Healthtech to stay ahead of regulatory changes.
Final Thoughts
India has the medical talent. Now it needs smart tax policies to scale its global footprint. By supporting health startups and hospitals with targeted incentives, we can transform “Heal in India” into a trusted, compliant, and globally respected mission.
👉 Need help claiming startup deductions, managing GST on international treatments, or structuring your healthcare venture? Talk to Efiletax today — your partner in compliance, simplified.
Google Snippet Summary (40–50 words):
India’s health startups and hospitals could benefit from proposed tax incentives to boost medical tourism. With ₹58.2 billion in potential by 2035, aligning tax policies with global demand could position India as a healthcare leader. Learn how to stay compliant and benefit from the shift.
FAQs
Q1. Are treatments for international patients taxable under GST?
Yes, services provided to foreign patients are treated as exports and are taxable unless structured under zero-rated supply or refund mechanisms.
Q2. Can health-tech startups claim deductions for R&D?
Currently, weighted deduction under Section 35 is not available, but basic deductions may still apply if accounted properly. Future policy changes may revive benefits.
Q3. Is hospital income from foreign patients eligible for tax holiday?
Not by default. But proposals are underway to grant tax holidays to hospitals meeting certain compliance and treatment export conditions.
Q4. How can startups prepare for future tax incentives?
Ensure DPIIT recognition, maintain audited books, and document all innovation, tech development, and foreign patient service data for future compliance claims.