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

Sensys

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