My friend was admitted in the hospital and died almost after 19 days in the hospital, Our Company sanctioned medical reimbursement worth Rs 2.15 Lacs but the audit department deducted Income Tax of almost Rs. 65000/-. Is there any provision to get that back as death claim, his family already spend that money & they got back the amount as reimbursement only. The same is not an income for his family. Deduction of Income tax of Rs 65,000/- is a big amount for that family. Is there any provision to get that amount back from the Income tax department? If so, kindly advise.
The legal provision for taxability of medical expenses reimbursement in respect of medical facilities in India in the hands of employee is as under:
– The fixed medical allowance given to an employee is taxable.
– Medical reimbursement done to an employee by an employer is not taxable in the hands of an employee, if treatment of the employee or his family member is done in any of the following hospitals:
a] Hospital maintained by an Employer
b] Hospital maintained by Central Government or State Government or Local Authorities
c] Hospital approved by Government for its employees
d] For certain prescribed diseases/ailment, hospital approved by the Chief Commissioner of Income Tax.
The reimbursement in (a) to (d) shall be tax free without any upper ceiling or cap.
- In respect of reimbursement of medical expenses reimbursement done to an employee for treatment in any hospital other than those covered in (a) to (d) above, there is a maximum cap of Rs. 15,000/-.
- In the case of your friend,
(i) if the treatment has been carried out in the hospital mentioned in 1 (a) to (c) or
(ii) if it is done in an approved hospital for certain prescribed diseases / ailment,
then, the amount will not be taxable in the hands of deceased employee.
The family can get back the refund from the income tax department after filing the income tax return of the deceased employee in a representative capacity.
The diseases & ailments for the purpose of above exemption are prescribed under Rule 3A of the Income Tax Rule as under:
(c) acquired immunity deficiency syndrome;
(d) disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation;
(e) ailment or disease of the eye, ear, nose or throat, requiring surgical operation;
(f) fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopaedic treatment;
(g) gynaecological or obstetric ailment or disease requiring surgical operation, caesarean operation or laperoscopic intervention;
(h) ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days;
(i) gynaecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days;
(j) burn injuries requiring medical treatment in a hospital for at least three continuous days;
(k) mental disorder – neurotic or psychotic – requiring medical treatment in a hospital for at least three continuous days;
(l) drug addiction requiring medical treatment in a hospital for at least seven continuous days;
(m) anaphylectic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days;
Recent announcements indicate that interest on savings bank account up to INR 10,000/- is exempt from income tax. The following doubts arises for which I seek your clarification:
- Does this mean that if my income from interest on one savings bank account is INR 12,500/- only INR 2500 is to be added to determine my net taxable income?
- Is this exemption available in addition to INR 1,00,000/- under 80C?
- Is this exemption available for each savings account separately earning interest more than INR 10,000/- or Only on total combined interest on savings accounts held in my name? That is, if I have three savings accounts each earning INR 12,100/-, 3,800/- & 15,950/- (Total INR 31,850/-), then only INR 10,000/- would be exempt (over & above 80 C or within) while balance INR 21,850/- would be added to determine taxable income or 10,000/- + 3,800/- + 10,000/- = 23,800/- will be exempt for individual savings accounts & only 8,050/- would be included in taxable income?
- If my income from all sources – FDs, Savings Interest etc is less than INR 2,00,000/- but interest on savings account exceeds INR 10000 would I be require to file IT Return?
- If the FD’s are maturing only in FY 2013-14 & interest would be paid only on maturity then do I have to include interest due till 31st March 2013 in the income? Please advice. [J. R. Witthal – email@example.com]
The Finance Bill 2012 has proposed to insert a new section 80TTA in the Income Tax Act – 1961 which will provide deduction up to Rs. 10,000/- to an Individual/ HUF from Gross Total Income towards Interest on saving bank A/c maintained with a bank / society / post office. The deduction admissible shall be interest receive or Rs. 10,000/- whichever is lower.
With above basic coverage on the provision propose to be incorporate, the replies to your queries are as under:
- The deduction towards interest on all saving accounts taken together cannot exceed Rs. 10,000/-. If the interest on saving bank account received is Rs. 12,500/-, then effectively only Rs. 2,500/- will be taxable.
- The deduction is in addition to deduction of Rs. 1 Lacs admissible u/s 80C of the Income Tax Act-1961.
As already mentioned, the maximum amount of deduction admissible u/s 80TTA can not exceed Rs. 10,000/-. If you will be receiving Rs. 31,850/- from three saving accounts, you will be entitle for Rs. 10,000/- only as deduction u/s 80TTA & the balance amount of Rs. 21,850/- will be taxable.
- The filing of income tax return would not be mandatory if your Gross Total Income is below the applicable basic exemption limit even though interest on saving accounts exceeds Rs. 10,000/-.
- The interest to be offer for taxation depends upon the method of accounting regularly followe by the assessee in recognizing the income.
If Assessee is following cash (Receipt) system of accounting then the interest income has to be offer at the end of FD Tenure i.e., at the time of maturity of FD. If Assessee is following mercantile (Accrual) system of accounting then interest income is require to be offer for taxation every year on due basis as income of that year only.
In view of the Circular No. 371 dated 21.11.1983 issue by the Central Board of Direct Taxes (CBDT), we advise the readers to offer the interest on Bank FDR on accrual (due) basis only.