Reimbursement of Medical Expenses

 Reimbursement of Medical Expenses  Reimbursement of Medical Expenses
Oct 272014
 

Reimbursement of Medical Expenses

General Principle

In the form of allowance Taxable
In the form of reimbursement Generally Tax – Free

The above conclusion is well explained in different situations of your life:-

Medical Expenses Allowance

An employee should avoid the receipt of an allowance for medical expenses but should rather take medical reimbursement, so that it is tax-free.

Medical Expenses: Reimbursement

Where an employee is allowed to get reimbursement for the medical expenses incurred by him at a hospital maintained by the employer or a Government approved hospital, the entire amount of reimbursement is tax-free and is not treated as a taxable perquisite.

For details on government approved hospital either go to www.incometaxindia.gov.in

Medical Reimbursement up to Rs. 15,000

If an employee receives money for his medical treatment or the treatment of any member of his family or any of his dependent relatives then a sum up to Rs. 15,000 p.a. is not treated as a taxable perquisite as per Clause (b) of the provision to Section 17 (2) of the I.T. Act.

Caution:-

  • The expenditure is actually incurred on his medical treatment or
  • For treatment of any member of the family or a dependant relative.

Relex:-

  • There is no condition that the medical treatment should be at any of the approved hospitals.
  • It could be at any place and from any type of doctor belonging to Allopathic, Ayurvedic, Unani or Naturopathy system of medicine.

Practical issue:-

Issue:- Whether health improvement / maintenance items like horlick, nutrient etc are also covered under medical treatment? If so, could medical treatment on the same be included in the reimbursement bill?

There is no clear guidance or case law on the issue. From the plain reading of the section and rules, it is clear that exemption is only in case if reimbursement is claim for medical treatments only. These are add – on or food supplement of daily requirements and hence could not be claim for exemption issue.

Issue:- Who is responsible to ensure medical bill being genuine?

It is employee responsibility to give original and genuine bills to employer. In case it is proved that bills were not genuine, the case come under forgery of Indian Penal Code and employer can sack employee.

By: SensysTechnologies

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com

Medical Treatment in India of an Employee’s Family Member

 Medical Treatment in India of an Employee’s Family Member  Medical Treatment
Oct 272014
 

Medical Treatment in India of an Employee’s Family Member

Under the provisions of Section 17(2), a good deal of the expenditure incurred by the employee on medical treatment, paid for by the employer, is not treated as a taxable perquisite.

This is secured by the proviso to Section 17(2) of the I.T. Act which says that the value of any medical treatment provided to any member of his family in any hospital maintained by the employer is completely exempt from income tax in the hands of employee.

Where any sum is paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or the treatment of any member of his family-

(a) in any hospital maintained by the employer, the Government or any local authority or any other hospital approved by the Government for the purpose of medical treatment of his employees;

(b) in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines, it is not treated as taxable perquisite at all.

Documentary requirement:-

In respect of expenditure on nature specified in (b) above employee shall have following document in his possession and certify copy of the same shall also furnished to his employer:-

  • A certificate from the hospital about the disease and the amount paid.

 Tax Planning:-

Employee should make proper tax planning and see that either the hospital where he or the member of his family is treated is a Government hospital or an approved hospital or is a private one, then it is approved by the Chief Commissioner of Income Tax.

 The above benefits are in addition to following benefits:-

  • A sum up to the maximum extent of Rs. 15,000 paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or any member of the family in a previous year.
  • Expenditure incurred by the employer on the medical treatment of the employee or any member of the family outside India.

 Prescribed Diseases

For the purpose of above exemption prescribed diseases defined under the rules of income tax are reproduce below for the sake of easy reference:-

 Rule 3A-(2) For the purpose of sub-clause (b) of clause (ii) of the proviso to clause (2) of Section 17, the prescribed diseases or ailments shall be the following namely,

(a) cancer;

(b) tuberculosis;

(c) acquired immunity deficiency syndrome;

(d) disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation;

(e) ailment or disease of the eye, ear, nose or throat, requiring surgical operation;

(f) fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopedic treatment;

(g) gynecological or obstetric ailment or disease requiring surgical operation, cesarean operation or laparoscopic intervention;

(h) ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days;

(i) gynecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days;

(j) burn injuries requiring medical treatment in a hospital for at least three continuous days;

(k) mental disorder, neurotic or psychotic requiring medical treatment in a hospital for at least three continuous days;

(l) drug addiction requiring medical treatment in a hospital for at least seven continuous days;

(m) anaphylactic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days.

By: SensysTechnologies

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com