Medical insurance deduction

This query is : Resolved 

02 January 2015 We are providing medical insurance cover to the employees w.e.f 1st Jan 2015. Needless to say, the premium of this is incurred by the Company. Also, along with this, we have given an option to the employees to insure their parents, premium of which, initially will be paid for by the Company and we will recover the premium form the employees in 6 equal installments starting Jan 2015. The insurance Company is giving us one consolidated invoice for the parents’ premium with an annexure with details of each employee and their parents. Need the following clarifications:

1. Basis the consolidated invoices with annexure given by the insurance Company, can we give tax exemption to the respective employees?
2. If yes, can we give the full exemption in the FY 2014-15, since the premium is paid fully by the Company in Jan 2015 – In other words, can we treat this as an advance to the concerned employee, and give full exemption in FY 2014-15
3. Or do we need to give tax exemption for the amount we have recovered from the employees till 31st March 2015 and the balance in 2015-16?

02 January 2015 Hi Neha,

1. Yes you can give tax exemption, but you need to give certificate to employee to claim it u/s 80D whenever required him..

2. No, you can not give full exemption, since amt is not paid by employee in Financial Year same can not be claimed..

Thanks

02 January 2015 you can give the deduction on paid amount by the employee. if its show as advance to employee then you can give he full amount deduction


02 January 2015 Thanks! Two clarifications:
1. @ Vaibhav, If Company allows deduction for part amount, can balance amount be allowed in next year when this amount is recovered.
2. @ Rupesh, Can company allow full deduction even if requirement under section 80D is that it should be paid out of Income Chargeable to tax.

Thanks!

03 August 2024 ### 1. Deduction for Part Amount of Medical Reimbursement

**Scenario:**
If a company allows a deduction for part of the medical reimbursement amount in a financial year, and the balance amount is recovered in the subsequent year, the treatment of the remaining amount depends on specific conditions.

**Income Tax Provisions:**
- **Deductibility in the Same Year:** Under the old provisions of Section 10(14) for medical reimbursement, the exemption was allowed up to ₹15,000 per annum based on actual reimbursement. If only a part of the amount was claimed or reimbursed, the remaining amount could not be carried forward to the next year for deduction.
- **Treatment of Unclaimed Amount:** Any balance amount that was not claimed as a deduction in the current year cannot typically be carried forward to the next year. It should be claimed in the year in which it is actually reimbursed.

**In Practice:**
- **Claim in Subsequent Year:** If a part of the medical expenses is reimbursed in the subsequent year, it would generally need to be claimed as a deduction in that subsequent year. This is because the medical reimbursement exemption was meant to apply to the year in which the reimbursement is actually received.

### 2. Deduction Under Section 80D

**Scenario:**
Section 80D of the Income Tax Act provides deductions for premiums paid on health insurance policies, but it must be paid out of income chargeable to tax.

**Key Provisions of Section 80D:**
- **Eligible Premium Payments:** Section 80D allows deductions for premiums paid on health insurance policies for the taxpayer, their spouse, children, and parents. The amount eligible for deduction is subject to certain limits.
- **Payment Out of Income Chargeable to Tax:** The deduction under Section 80D is available only if the premium is paid out of income chargeable to tax. If a company reimburses the amount directly, it is not considered as paid out of the employee’s income chargeable to tax.

**Company Allowing Full Deduction:**
- **Tax Compliance:** A company can provide medical benefits or reimbursements to employees, but for claiming deductions under Section 80D, the payment must be made from income chargeable to tax. The company’s reimbursement would not qualify for Section 80D if it was not paid from the employee’s income.
- **Personal Claim:** Employees should ensure that any amount they pay for health insurance premiums themselves (not reimbursed by the company) is paid from their taxable income to claim deductions under Section 80D.

**Summary:**

1. **Medical Reimbursement Deduction:** If only a part of the medical reimbursement is allowed in a financial year, the remaining amount cannot typically be carried forward to the next year. It should be claimed in the year it is reimbursed.

2. **Section 80D Deduction:** Deductions under Section 80D must be for premiums paid out of income chargeable to tax. If a company reimburses premiums or provides benefits, it should not be considered as paid from the employee’s taxable income for Section 80D purposes. Employees should personally ensure premiums are paid from their taxable income to claim the deduction.

For specific advice tailored to your situation, particularly in relation to company policies and income tax regulations, consulting a tax professional or chartered accountant is advisable.



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