Some employers provide medical reimbursement facility to their employees for the medical expenses incurred by the employees. This article explained the levy of Income Tax on Medical Reimbursement provided by the employer to the employee.
Income Tax on Medical Reimbursement exempt up to Rs. 15000
No Income Tax on Medical Reimbursement is levied up to Rs. 15000 provided all bills for the same are furnished by the employee to the employer.
Such exemption of Rs. 15000 from the levy of Income Tax on Medical Reimbursement is the cumulative exemption allowed in a financial year for the amount actually incurred by the employee for obtaining the medical treatment of self or any of his family members.
Family for the purpose of Medical reimbursement means:-
- The spouse and Children of the employee. Children may be dependent or Independent, married or unmarried
- Parents, Brothers and Sisters of the employee who are wholly or mainly dependent on the employee.
The bills of Rs. 15000 should necessarily be furnished by the employee to the employer. However, these bills should not necessarily be of Govt hospitals or any specified hospital. Bills for any expense incurred on Medical Treatment of self or family members in any Private Hospital/Clinic etc. can also be furnished for Medical Reimbursement to be treated as a tax-free perquisite.
Any amount in excess of Rs. 15000 being reimbursed to the employee by the employer would be added to the income under head salary and at the time of filing of income tax return, tax would be liable to be paid on the same as per the income tax slabs of the individual.
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Apart from this Medical Reimbursement of Rs. 15,000 being treated as tax-free perquisite, there are other certain other medical treatments which are treated as tax-free perquisites.
However, there are several conditions which have to be satisfied for such other medical reimbursements to be classified as tax-free perquisites. These conditions have been explained below in this article.
Income Tax on Medical Reimbursement and Medical Allowance
Some employers also provide their employees with Medical Allowance. The difference between Medical Reimbursement and Medical Allowance is that in Medical Reimbursement, the employee first has to incur the expense from his own pocket and then provide the bills to his employer, who will then reimburse the actual amount spent.
However, in Medical Allowance, the employer gives a pre-specified amount to the employee irrespective of the expense incurred by the employee. The employee is not even required to furnish the bills to the employer.
It should be noted that although No Income Tax on Medical Reimbursement is levied up to Rs. 15,000, the amount received as Medical Allowance would be fully taxable as it is not covered under the tax-free allowances for employees.
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Income Tax on specific Medical Reimbursement/ Medical Facility in India
Apart from Medical Reimbursement of Rs. 15,000 being treated as a tax-free perquisite, the following are also treated as tax-free perquisites under Section 17(2) and no Income Tax on Medical Reimbursement/Medical Facilities is levied in the following cases for treatment in India:-
- The value of any medical treatment provided to an employee or any member of his family in any hospital, maintained by the employer.
- Medical reimbursement provided by an employer to an employee for medical treatment of self or family members in any hospital maintained by the Govt. Or Local Authority or in a hospital approved by the Govt for treatment of its employees.
- Medical reimbursement provided by an employer to an employee for medical treatment of self or any of his family member’s medical treatment in respected of the prescribed diseases or ailments as prescribed in Rule 3A of the Income Tax Rules in any hospital prescribed by the Chief Commissioner of Income Tax. However, in such cases, the employee has to attach along with his income tax return, a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital.
- Any portion of the Insurance premium paid by the employer for insurance and health of the employee under a scheme approved by the General Insurance Company.
- Any reimbursement by the employer of any insurance premium paid by the employee, for an insurance for his health or the health of any member of his family under a scheme approved by the General Insurance Corporation of India for the purpose of Section 80D is also a tax-free perquisite.
Income Tax on Payment for Medical Treatment outside India
The following expenditure incurred by employer on treatment of the employee or his family members outside India is also a tax-free perquisite:-
- Expenses on Medical Treatment of the employee or any member of his family outside India. However, such expenses shall be tax free perquisite to the extent permitted by RBI.
- Expenses on stay abroad of the employee or any member of his family for medical treatment with one attendant who accompanies the patient in connection with such treatment. The expenses shall also be treated as tax free perquisite to the extent permitted by RBI.
- Travel expenses of the patient (employee or his family member) and one attendant who accompany the patient in connection with such medical treatment. It shall be tax free in the case of those employees whose gross total income (before including therein the such travel expenditure as perquisite) does not exceed Rs. 2,00,000. In other words, if the gross total income of the employee before including the taxable medical perquisite on account of travel expenditure exceeds Rs. 2,00,000, the expenses on travel of the patient as well as of the attendant shall become taxable.