• Income tax on medical bill reimbursement

My annual income is 8.40lacs , i work in a bank , in May 2021 my mother was diagonsed with stage 4 breast cancer and Sept 2021 my dad was diagonased with early stage MDS . Both my parents are undergoing expensive treatment as cancer medicines are expensive . Since May 2021 i have take out all my savings and paid the medical bills and submitted it for reimbursement . The claims are processed in last 3 months but since the medical bill reimbursent my salary slip showing my income as 16lac per annum ,and i got tax 44,000 this month as per my provisinal salary slip. My question is why am i getting taxed 3 times ??? The savings were part of my salary which i already paid tax on , which i used to pay the medical bill , then while processing TDS was debited on the reimbursment and them the disbursed amount is shown as part of my annual income which is increasing my tax slab because of which i am taxed again. Since my original salary is just 8lac i do not have any investments other PPF and contrubutory pension for ITR. Is this correct way to debit tax ???or should i raise query with my salary department about the same???
Asked 2 years ago in Income Tax

I am little confused. Are you saying that you got extra reimbursement from your employer over and above salary? If yes, then tax would be levied on this. Otherwise, your salary should not be 16 lacs.

 

In case you got this reimbursement from medical insurance company then also it should not increase your salary.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

Is medical bill reimbursement part of your salary. Is any such clause mentioned in your employment letter. According to me tax should not be deducted on reimbursements. You should raise a query to get better clarity.

Ruchi Goel Anchal
CA, Gurgaon
525 Answers
16 Consultations

5.0 on 5.0

It is not perquisite subject to fufillment of following conditions:

- If the medical treatment was undertaken in any hospital maintained by the govt., or local authority or hospital approved by GOI for medical treatment of its employees (i.e. CGHS or CMS);

- in respect of prescribed diseases it should be approved by the principal chief commissioner or chief commissioner. Prescribed diseases includes cancer. What is MDS?

 

If treatment does not fulfill the above conditions then the reimbursement would be treated as perquisite. You have not mentioned the amount of reimbursement.  Further you can share the tax computation sheet at my email id aroravivek1982@gmail for review.

 

Vivek Kumar Arora
CA, Delhi
4840 Answers
1037 Consultations

5.0 on 5.0

Employees can claim a tax benefit of up to Rs. 15,000 under medical reimbursement (payments for bills or supporting documents).

 

Medical reimbursement is not taxable if the treatment of an employee or his family member is undertaken in any of the following hospitals:

  • Hospital maintained by Employer
  • Hospital maintained by Central Government/ State Government/ Local Authorities
  • Hospital approved by government
  • Hospital approved by the Chief Commissioner of Income Tax.

Prerna Peshori
CA, Pune
194 Answers
11 Consultations

5.0 on 5.0

Respected Sir,

Many often use the words ‘medical reimbursement’ and ‘medical allowance’ interchangeably assuming that they mean the same. However, the terms encompass different tax treatments as per Income Tax Act, 1961. According to experts, the correct nomenclature vis-a-vis the medical component of an employee’s salary should be ‘medical reimbursement’ and not medical allowance since allowance is taxable in several cases, except specifically exempted.

Medical reimbursement comes under Section 80D, wherein the maximum limit prescribed is Rs. 15,000 p.a. If bills regarding medical reimbursement are not submitted on time by an employee, 30% of Rs. 15,000 will then become the taxable amount. However, while filing tax returns, employees can reclaim 30% of the amount. Medical reimbursement is open to scrutiny by auditors and IT department sleuths. It is the employers’ responsibility to pay medical reimbursement after employees produce authentic bills to claim tax exemption. If an employer is not deducting taxes on the amount (for which no bills are submitted), it could result in TDS-related penalties.

No tax is levied on medical reimbursement up to Rs. 15,000 if all bills are furnished by an employee to his or her employer as per clause (b) of Section 17 (2) of the IT Act, 1961. The amount of Rs.15,000 is, therefore, the cumulative exemption provided in a financial year for expenses incurred by an employee during medical treatment of self or any of his family members. Family for the purpose of reimbursement includes spouse and children (dependent or independent, single or married) or parents and siblings (wholly or mainly dependent) of an employee. As per clause (VI) of Section 17 (2) of the IT Act, 1961, medical expenditure incurred by an employee or any of his family members outside India is fully tax-exempt. There are no restrictions in terms of allopathic, homeopathic, or other forms of treatment to claim exemption.

Medical reimbursement is not taxable if the treatment of an employee or his family member is undertaken in any of the following hospitals:

  • Hospital maintained by Employer
  • Hospital maintained by Central Government/ State Government/ Local Authorities
  • Hospital approved by government
  • Hospital approved by the Chief Commissioner of Income Tax.

 

Thanks & Regards 

Shiv Kumar Agarwal

Shiv Kumar Agarwal
CA, Delhi
489 Answers
74 Consultations

5.0 on 5.0

Let's first get facts clear you can say you are getting taxed twice and not thrice as deducting TDS and showing it as part of your salary are same thing.

Now you are not getting taxed twice also because although you are paying medical bills out of your own savings but you are asking your employer to reimburse it when it is not his responsibility and hence he need to tax amount paid to you.

If it would have been medical premium the situation would have been different but since you are again asking your employer to reimburse the amount hence it is getting taxed.

 

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4272 Answers
97 Consultations

5.0 on 5.0

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