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Kindly intimate, whether the amount received under medical reimbursement is taxable or not? If taxable under which section it is taxable and what is the amount exempted? Kindly advise. [Alok Majumdar -email@example.com]
“What’s in a name?
That which we call a rose by any other name would smell as sweet.” – William Shakespeare.
It may not be true when it comes to income Tax Act-1961. Everything is there in the name. Taxability or exemption of medical benefit from employer would depend upon the name.
In routine course, “Medical allowance” & “medical reimbursement” are used interchangeably without realizing the fact that they are two different words with different tax treatment so far as the Income Tax Act-1961 is concerned. “Medical allowance’ is a fixed allowance paid every month to employees irrespective of expenditure actually incurred. “Medical reimbursement” is a payment made to employees against medical expenses actually incurred by them.
Fixed medical allowance is taxable whereas medical reimbursement is tax free subject to a maximum sum of Rs. 15,000/- per annum [Section 17(2]. If employer reimburse more than Rs.15,000/- in a year against medical bills, amount exceeding Rs.15,000/- would be taxable in the hands of the employee. Further, the exemption is available not only against an expense incurred for his own medical treatment but also available against the medical expenses incurred for his family members, who are dependent on him. Family members include spouse, children, parents, brother or sister of the employee.
With ever rising diseases & increasing pollution, Medical expenses have become an integral part & parcel of every family. From tax planning point of view, receiving medical reimbursement would be beneficial for the employee rather than receiving the fixed medical allowance.
In addition to tax free reimbursement of medical expense up to Rs. 15,000/- as explained above, following are also considered as tax free perquisite & no income tax in payable in the following cases:
- 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 the medical treatment of self or family members in any hospital maintained by the Government or Local authority or in a hospital approved by the Government 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 respect of prescribed disease or ailment as prescribed in Rule 3A of the Income Tax Rules in any hospital prescribed the Chief Commissioner of Income Tax. However, in such case, an employee has to obtain 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 scheme approved 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.
I was in Defense services and filed regular IT return. My last posting was in Delhi where I have submitted my last return in 2004 and permanently shifted to Nagpur. I inquired about the return filing place & they advised to file my return in Nagpur with new address therein at Nagpur. No fresh PAN is issued to me. As advised, I am filing my IT returns in Nagpur regularly. Is this OK or I have to obtained new PAN from Nagpur? Please guide. [firstname.lastname@example.org]
Permanent Account Number (PAN) is a onetime number allotted by income tax department. Once allotted, it never changes even if there is change in the place of the employment or residence, change in the name of the person, or for any other reasons. Since you have shifted to Nagpur, its proper on your part to file the return of income at Nagpur with your contact details of Nagpur. It is always advisable to file the return showing the latest address so that all the communication reaches properly. However, by filing the returns with new address doesn’t automatically changes the record of income tax department. Whenever there is a change in the taxpayer address, they can get the data updated in the income tax department by making an application titled “Request for New PAN Card or/and Changes or Correction in PAN data”. Documents in support of changes are required to be attached with the form. The form can be downloaded from the websites of UTI Technology Services Ltd (UTITSL), National Securities Depository Ltd (NSDL), or the I-T department [www.utitsl.co.in, www.tin-nsdl.com or www.incometaxindia.gov.in]. Taxpayer has to tick the “Address” column on the left margin of the form & also latest color stamp-sized photographs is required to be affixed on the form. The form can be submitted at TIN facilitation centers of UTITSL and NSDL, the addresses of which are available in the above mentioned website.
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