Deduction
This query is : Resolved
10 September 2009
Kindly go through with the following points:
1. The employer has paid Rs.5.85 Lacs towards medical reimbursement to an employee during a financial year.
2. Nature of disease: Chronic Renal Failure
In this case, the employer has the following options for deduction under I.Tax Act:
a) Deduction upto Rs.15,000/- u/s 80D can be allowed and Rs.5.85 lacs will be included within the GTI of the employee and Rs.5.70 lacs (Rs.5.85 lacs less Rs.15,000/-) is taxable.
b) Since, the claim of the employee is supported by Bills and Documents therefore it is to be treated as a case of reimbursement and not a perquisite. Hence, reimbursement amount not to be included within the GTI of the employee and the same is not at all taxable.
c) The disease is a specified disease as per section 80DDB. As such, Deduction upto Rs.40,000/- u/s 80DDB can be allowed and Rs.5.85 lacs will be included within the GTI of the employee and Rs.5.45 lacs (Rs.5.85 lacs less Rs.40,000/-) is taxable.
Now, my question is which of the above three option the employer will follow for the purpose of Income Tax. If any body wants to give some different opinion then please give your view/opinion with relevant provisions and sections of I.T Act.
1. The employer has paid Rs.5.85 Lacs towards medical reimbursement to an employee during a financial year.
2. Nature of disease: Chronic Renal Failure
In this case, the employer has the following options for deduction under I.Tax Act:
a) Deduction upto Rs.15,000/- u/s 80D can be allowed and Rs.5.85 lacs will be included within the GTI of the employee and Rs.5.70 lacs (Rs.5.85 lacs less Rs.15,000/-) is taxable.
b) Since, the claim of the employee is supported by Bills and Documents therefore it is to be treated as a case of reimbursement and not a perquisite. Hence, reimbursement amount not to be included within the GTI of the employee and the same is not at all taxable.
c) The disease is a specified disease as per section 80DDB. As such, Deduction upto Rs.40,000/- u/s 80DDB can be allowed and Rs.5.85 lacs will be included within the GTI of the employee and Rs.5.45 lacs (Rs.5.85 lacs less Rs.40,000/-) is taxable.
Now, my question is which of the above three option the employer will follow for the purpose of Income Tax. If any body wants to give some different opinion then please give your view/opinion with relevant provisions and sections of I.T Act.
10 September 2009
Reply is awaited.
10 September 2009
Reply is awaited.
11 September 2009
It is assumed that the disease is Prescribed disease or aliment and assesse incurs actual expenditure at the hospital approved by the Chief commisioner, and assesse provides a certificate from the hospital reg the ailments, he can claim entire amount ie. actual amt as exempted under the proviso to sec 17(2) of IT Act.
Else he can claim nly Rs 15,000. and 80DDB
Else he can claim nly Rs 15,000. and 80DDB
20 July 2024
Among the options provided, the correct treatment depends on the specifics of the situation and the provisions of the Income Tax Act. Let's analyze each option in the context of the reimbursement of medical expenses for Chronic Renal Failure:
1. **Option (a)**: Deduction under Section 80D
- Under Section 80D of the Income Tax Act, a deduction of up to Rs. 15,000 is allowed for medical expenses incurred on the health of the taxpayer, spouse, dependent children, and parents. For senior citizens, this limit can go up to Rs. 50,000.
- However, this deduction primarily applies to preventive health check-up or other medical expenses not related to specified diseases covered under Section 80DDB.
2. **Option (b)**: Treatment as Reimbursement
- If the medical reimbursement of Rs. 5.85 lakhs is supported by bills and documents, and it is treated purely as reimbursement of actual medical expenses incurred by the employee for the treatment of Chronic Renal Failure, it can be argued that this amount should not be included in the Gross Total Income (GTI) of the employee.
- Reimbursements of medical expenses are generally not considered taxable perquisites if they are fully supported by bills and related documents and are specifically for medical treatment.
3. **Option (c)**: Deduction under Section 80DDB
- Section 80DDB allows for a deduction of up to Rs. 40,000 (Rs. 1 lakh for senior citizens) for expenses incurred on treatment of specified diseases, including Chronic Renal Failure.
- If the conditions specified under Section 80DDB are met (such as obtaining a certificate from a specialist doctor), the employer can opt to treat the reimbursement as eligible for deduction under this section.
- In this case, Rs. 5.85 lakhs would be included in the GTI of the employee, and the deduction of Rs. 40,000 (or actual expenses, whichever is less) would be available under Section 80DDB.
**Considerations**:
- **Documentation**: Ensure that all medical bills and documents supporting the reimbursement are maintained properly.
- **Tax Implications**: The approach chosen by the employer will impact how the reimbursement amount is treated for tax purposes:
- Option (a): Limited deduction under Section 80D, but the entire reimbursement amount may be taxable.
- Option (b): If treated purely as reimbursement, the amount may not be taxable.
- Option (c): Higher deduction under Section 80DDB, but a portion of the reimbursement amount remains taxable.
**Conclusion**:
The employer should carefully evaluate the specifics of the case, including the nature of disease, the documentation available, and the employee's tax liability, before choosing the appropriate treatment. Consulting with a tax advisor or legal expert would be prudent to ensure compliance with the Income Tax Act and to optimize tax benefits for the employee.
1. **Option (a)**: Deduction under Section 80D
- Under Section 80D of the Income Tax Act, a deduction of up to Rs. 15,000 is allowed for medical expenses incurred on the health of the taxpayer, spouse, dependent children, and parents. For senior citizens, this limit can go up to Rs. 50,000.
- However, this deduction primarily applies to preventive health check-up or other medical expenses not related to specified diseases covered under Section 80DDB.
2. **Option (b)**: Treatment as Reimbursement
- If the medical reimbursement of Rs. 5.85 lakhs is supported by bills and documents, and it is treated purely as reimbursement of actual medical expenses incurred by the employee for the treatment of Chronic Renal Failure, it can be argued that this amount should not be included in the Gross Total Income (GTI) of the employee.
- Reimbursements of medical expenses are generally not considered taxable perquisites if they are fully supported by bills and related documents and are specifically for medical treatment.
3. **Option (c)**: Deduction under Section 80DDB
- Section 80DDB allows for a deduction of up to Rs. 40,000 (Rs. 1 lakh for senior citizens) for expenses incurred on treatment of specified diseases, including Chronic Renal Failure.
- If the conditions specified under Section 80DDB are met (such as obtaining a certificate from a specialist doctor), the employer can opt to treat the reimbursement as eligible for deduction under this section.
- In this case, Rs. 5.85 lakhs would be included in the GTI of the employee, and the deduction of Rs. 40,000 (or actual expenses, whichever is less) would be available under Section 80DDB.
**Considerations**:
- **Documentation**: Ensure that all medical bills and documents supporting the reimbursement are maintained properly.
- **Tax Implications**: The approach chosen by the employer will impact how the reimbursement amount is treated for tax purposes:
- Option (a): Limited deduction under Section 80D, but the entire reimbursement amount may be taxable.
- Option (b): If treated purely as reimbursement, the amount may not be taxable.
- Option (c): Higher deduction under Section 80DDB, but a portion of the reimbursement amount remains taxable.
**Conclusion**:
The employer should carefully evaluate the specifics of the case, including the nature of disease, the documentation available, and the employee's tax liability, before choosing the appropriate treatment. Consulting with a tax advisor or legal expert would be prudent to ensure compliance with the Income Tax Act and to optimize tax benefits for the employee.
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