In salary head, there are many elements. One is medical expenses’ reimbursement. yes, medical expenses are done by employee and bill is paid by employer. In this case, what will be tax implications? Read it in this post.

Tax on Medical expenses when bill is paid by employer:

First, understand one thing that medical reimbursement is not medical allowance. Both are different things. Medical allowance is fixed amount the employee gets per year from employer. While medical reimbursement is the one which the employer reimburses the employee which the employee has incurred for his or his relatives’ medical treatment.

Tax treatment: (section 17(2))Fixed Medical Allowances: Always taxable.

Medical facility:

If provided in any hospital maintained by the employer. : fully exempt

If any sum paid by employer for medical treatment of employee or his family member in the hospital maintained by the government, local authority, in hospital approved under central government health scheme or state government health scheme. : fully exempt

If any sum paid by employer for medical treatment of employee or his family member in the hospital approved by the chief commissioner for prescribed diseases or ailments : fully exempt.

To claim above exemption, the employee has to show receipt of payment and certificate from the hospital specifying the disease or ailment for which medical treatment was required.

If employer has paid group insurance premium for employees or employer has paid premium of insurance taken by employee or his family under scheme approved by the central government or IRDA for the purpose of section 80D, it is also fully exempt.

If employee or his family  receives medical treatment in hospital other than above specified hospitals (private hospital) and employer reimburses the expenses, the expenses will be exempt up to Rs. 15,000 for the year.

Medical treatment outside India

If employer incurred for medical treatment availed by employee or his family outside India,The expenditure for medical treatment of patience and stay abroad of the patience and one attendant is exempt to the extent permissible by RBIAnd travelling expenditure is exempt only if the gross total income of employee including taxable travel expenditure, does not exceed Rs. 2,00,000. In any other case, it is totally taxable.

Note :Family means

  1. spouse and children (dependent or not)
  2. Parents, brothers and sisters of the individual (wholly dependent).

Medical treatment

Amount paid by employer

Total income

Taxability

In Gov hospital

1,00,000

Exempt

In private hospital

60,000

45,000 taxable

In hospital prescribed by chief commissioner for prescribed disease

2,00,000

Exempt

In hospital prescribed by chief commissioner for non prescribed disease

1,00,000

1,00,000 taxable

Medical insurance/group insurance

20,000

Exempt

Medical treatment in abroad

2,00,000

Exempt prescribed by RBI

Travelling expenditure in abroad

1,50,000

1,50,000

exempt

Travelling expenditure in abroad

1,50,000

2,50,000

Taxable 1,50,000

Medical allowance

20,000

Taxable 20,000

So little awareness about tax rules can save you from tax. Next time, remember these rules while getting bill of medical expenses and showing it to your employer to save tax.