suppose a person getting monthly salary of rs. 50,000/- and his break up is given below
basic 20,000/- HRA 15,000/- conveyance 10,000/- Medical reimb. 5,000/-
medical allowance is fully taxable but as far as medical reimb. is concerned it is exempted up to 15000/-
so my query is this, if he provides medical bill up to rs. 15,000/- as reimbursement, can he get deduction of rs. 15,000/-
because reimbursement is fixed in a nature per month i think it is taxable ? but some people says it is non taxable and he can get deduction of rs. 15000/-
but i think reimbursement is apart from salary and it can not be included in salary ,and it is non taxable if employee provide bills for getting these deduction
and these reimbursement is sepretaly shown as medical exp in the books of company not as part of salary or salary ?
but as far as i think in section 80D only mediclaim is covered and medical reimbursement is cover under Section 17[2] as perquisite,
and other point is medical reimbursement can not be fixed in nature and it can't be part of salary, and not shown in salary slip, but in this case it fixed in nature
03 August 2024
Your query involves understanding the treatment of medical reimbursement in terms of taxability and deductions. Let’s clarify the key points related to medical reimbursement and deductions:
### Medical Reimbursement vs. Medical Allowance
1. **Medical Allowance vs. Medical Reimbursement:**
- **Medical Allowance:** This is a fixed amount provided by the employer to cover medical expenses. It is fully taxable in the hands of the employee, as there is no requirement to submit any bills.
- **Medical Reimbursement:** This is meant to cover actual medical expenses incurred by the employee. It is exempt up to ₹15,000 per annum if certain conditions are met. Reimbursements are typically made based on actual expenses and require the submission of medical bills.
### Taxability and Deduction
1. **Medical Reimbursement Exemption:**
- **Pre-Finance Act, 2018:** Before the Finance Act, 2018, medical reimbursement was exempt up to ₹15,000 per annum under **Section 10(14)**. This exemption applied only to the amount actually reimbursed by the employer, and you needed to submit medical bills for this exemption.
- **Post-Finance Act, 2018:** The Finance Act, 2018, replaced the medical reimbursement exemption with a standard deduction of ₹40,000 (later increased to ₹50,000) for salaried individuals. This standard deduction covers medical reimbursement along with other allowances, so the specific ₹15,000 exemption no longer applies.
2. **Fixed Reimbursement:**
- **Nature of Reimbursement:** Even if medical reimbursement is fixed in nature, it must adhere to the tax rules applicable to medical reimbursement. If it is fixed but intended to cover medical expenses, it must still follow the same rules for exemptions or deductions.
3. **Claiming Exemption:**
- **For FYs Before 2018-19:** If the reimbursement is provided under the pre-Finance Act, 2018 rules, and if you provide medical bills for reimbursement up to ₹15,000, then the exemption applies. This means you could claim the entire ₹15,000 as exempt from tax.
- **For FYs 2018-19 Onwards:** The medical reimbursement exemption was replaced with a standard deduction. So, you will not claim a separate exemption of ₹15,000 for medical reimbursement. Instead, the standard deduction applies.
4. **Reimbursement vs. Allowance:**
- **Medical Reimbursement:** If properly structured and documented, medical reimbursement can be exempt up to ₹15,000 per annum. The fixed nature of the reimbursement does not affect its exemption as long as it is backed by actual expenses and bills.
- **Medical Allowance:** The fixed medical allowance is fully taxable, and no exemption is available.
### Summary:
- **Pre-Finance Act, 2018:** For medical reimbursement up to ₹15,000, you need to provide medical bills, and the exemption applies. The fixed nature of the reimbursement does not change its tax treatment as long as it is properly documented.
- **Post-Finance Act, 2018:** The specific exemption of ₹15,000 for medical reimbursement is replaced by a standard deduction of ₹40,000 (later ₹50,000). Medical reimbursement is now included in this standard deduction.
In conclusion, for the financial years before FY 2018-19, if you provide medical bills, you can claim exemption up to ₹15,000 for medical reimbursement. For the financial years FY 2018-19 and onwards, the standard deduction covers medical reimbursement, so the specific ₹15,000 exemption is no longer applicable.
For personalized advice and to ensure compliance with the latest tax regulations, consulting a tax professional or chartered accountant is recommended.
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