Oct 312014
 

Tax implication in case of Medical Treatment at a Private Hospital

Who are treated as private hospital under income tax act?

An employee may sometimes be given treatment at a private hospital and not necessarily at a hospital maintained by the Government or any local authority, which may not be approved for the medical treatment of employees of the Government. Such a hospital is normally treated as a private hospital.

Tax implication in case private hospital is approved by Chief Commissioner:-

If Private Hospital is approved by the Chief Commissioner of Income Tax, having regard to the prescribed guidelines for the purposes of medical treatment, any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family is completely exempt from income tax under Clause (ii) of the proviso to Section 17 (2) of the I.T. Act.

Hence, proper planning should be adopted for getting an employee or a member of his family treated at a private hospital which is approved by the Chief Commissioner.

Documents required for claiming exemption:-

Attaching a certificate with the I.T. Return from the hospital specifying the disease and the amount paid to the hospital.

Indoor Medical Treatment at an Approved Hospital

The expenditure incurred by the employer on the indoor treatment at an approved hospital is not treated as a perquisite within the meaning of Section 17(2) of the I.T. Act.

Medical Treatment at Hospital: Allowance

If an employee instead of being provided free treatment in a hospital is given an allowance for hospital treatment, the allowance would not be liable to exemption under the Proviso to Section 17 (2) and would be taxed in the hands of the employee.

Note:- Tax planning should be adopted by the employee so that he does not receive any hospital treatment allowance as such but receives reimbursement of expenditure or payment for hospital treatment in full by the employer.

 Medical Treatment at Hospital: Reimbursement

Where an employee or any member of his family is provided with free medical treatment in any hospital maintained by the employer, the value of the perquisite is nil.

 The same is the case where free hospital treatment is either provided or is reimbursed by the employer for an employee or a member of his family in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of the medical treatment of its employee or any private hospital approved by the Chief Commissioner of Income Tax for the treatment of prescribed ailments and diseases. This is so under the provisions of the proviso to Section 17 (2) of I.T. Act, 1961.

Medical Treatment at Unrecognized Hospitals

If an employee or a member of his family is provided with free medical treatment in an unrecognized hospital, it is not exempt from income tax under the proviso to Section 17(2) of the I.T. Act.

 However, by various judicial decisions it has been held that the value of medical reimbursement facility provided by the employer to employee should not be treated as a taxable perquisite.

 Conclusions:

  1. On general grounds without resorting to the specific provisions of the proviso to Section 17(2) of the I.T. Act, the value of the medical treatment in unrecognized hospitals is also to be treated as tax-free. But this is likely to cause litigation.
  1. Employers and employees should avoid medical treatment of the employees in unrecognized hospitals or clinics.
  1. Up-to Rs. 15,000 p.a. medical treatment at unrecognized hospitals would also not be income.

 By: SensysTechnologies

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

Sensys

  8 Responses to “Tax implication in case of Medical Treatment at a Private Hospital”

  1. Please confirm whether Dande hospita,Nagpur, Maharashtra is registered by Chief Commissioner of Income Tax for u/s 17(2)

  2. since for AY 2019-20 medical expenses reimbursement to the tune of Rs.15000/- has been merged with standard deduction of Rs.40000/-
    pl. confirm if medical treatment cost in a Govt. hospital exemption still exists

  3. KEM HOSPITAL MUMBAI हे CCIT
    मान्यतापात्र आहे का या हॉस्पिटलमध्ये केलेल्या उपचारांवरील medical reimbursement करमुक्त आहे का लवकर मार्गदर्शन करावे

  4. Which form is to be filled in while applying before the CCIT for approval of hospital u/s 17(2)(ii) of the Act?

  5. We have received office order vide CCIT/PKL/TECH/2016/17(2) Issued on 05.09.2016 issued by Chief Commissioner of Income Tax Haryana Region, Panchkula regarding Grant of Tax Excemtion to Nayati Multi Speciality Hospital,Gurgaon,Haryana. Again on 26.09.2016 a corrigendum issued to this effect vide F.No CCIT/PKL/Tech/2016-17 17(2) approval u/s 17(2) of the income tax act given to M/s Nayati Multi Speciality Hospital Mathura. Since both the Hospitals are located in two different states, The corrigendum issued in favour of Nayati Hospital Mathura can be considered for exemtion of Medical Purquisites. However the same was not issued by Agra Commissioner of Income Tax.

  6. I am a retired employee aged 74 yrs. Last year I had a fall and broke my hip bone and had to be operated upon in a private hospital. They charged me 1.5lakhs. My employer reimbursed me 1.18 lakhs. Is this reimbursement taxable?

  7. Is the medical reimbursement for the treatment of Cancer in Tata memorial Hospital, Mumbai and any other private Licensed, Run by the charitable authority will be taxable?

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