Salary Income

This query is : Resolved

Prakash Mehta (Querist)
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21 February 2009 (Q-1)Reimbursement of Mediclaim Premium in respect of policy approved for section 80D of the Income tax Act.

I have paid the Mediclaim premium for my wife, my daughter and for myself. My employer has reimbursed me the said premium. I understand that the said reimbursement is not treated as perquisite in my hands in view of clause (iv) of proviso to section 17(2). Thus, no tax is payable my me, however, my employer may have to pay FBT.

My query is whether I can claim the deduction u/s. 80D in respect of Mediclaim premium initially paid by me but later on it is reimbursed by my employer. I understand that section 80 D speaks about individual and HUF and only requirement is that the premium shall be paid out of income chargeable to tax and it need not necessarily be the out of salary income. I feel that I have complied with the requirement of section 80 D by paying the premium out of my salary income. The event of reimbursement is occurred subsequently.

In view of above, please state whether am I correct in above understanding? Please also state your view to give correct treatment.

(Q-2) Transport allowance u/s. 10 (14)(ii) and reimbursement of running & maintenance of Car Expenses.

My company has given me the transport allowance of Rs.9,600 p.a.. Further, the company has given me the car for using it for official as well as personal purpose. At present my company reimburses me for servicing & repairs expenses for the said car and pay the FBT on such reimbursement. The car is owned by the company.

I am using the said car for commuting between office and residence, for office purpose and for other personal purposes.

I have proposed my company to reimburse me the petrol bills, cleaning expenses not restricted to repairs expenses being the running expenses of car.

The above petrol bills are inclusive of expenses incurred for commuting between office & residence.

Further, the company additionally reimburses me @ Rs. 4 per k.m. in respect of local travelling for office purpose, which is not part of my pay package.

From the above, I want to know that whether I can claim transport allowance of Rs. 9,600 and further submit the petrol bills to take salary in the form of reimbursement.

(Q-3) Children Education Allowance & deduction of tuition fee u/s. 80C.

At present I have one child. I pay Rs. 10,000 towards tuition fee. My employer gives me education allowance of Rs.1,200 which I claim as exempt allowance u/s. 10(14)(ii) and also claim tuition fee of Rs.10,000 in section 80C.

From the above, I want to know whether my both claims are correct or I am claiming the double benefit of Rs.1,200. Should I have to exclude Rs.1,200 from Rs.10,000 while claiming deduction u/s. 80C.

(Q-4) Children Education Allowance & Hostel Allowance.

My company gives me children Education Allowance & Hostel Allowance as part of my salary. I have a child but neither studying nor staying hostel.

In above circumstances, I want to know can I claim Rs. 100 per month and Rs.300 per month towards children education allowance and hostel allowance respectively. I understand that section 10(14)(ii) exempt such allowance regardless of incurrence of expenditure.

Please clarify.

(Q-5) Reimbursement of personal telephone including mobile phone expenses.

At present I am incurring Rs.12,000 per year towards my personal telephone & mobile expenses.

I have proposed my company to reimbursement me the said amount by converting my salary as reimbursement.

I understand that as per section 17(2)(vi) read with proviso to rule 3 (7) (ix), the above said reimbursement is not treated as taxable perquisite in my hands, however, company has to pay FBT. Further requirement of “actually incurred” shall meet even if instead of direct incurrence, the same is incurred by way of reimbursement.

Further, my apprehension is can department take recourse of section 17(2)(iv) and treat the said reimbursement as taxable perquisite in the hands of employee in spite of clear provision of section 17(2)(vi) and rule 3 (7) (ix).

Please clarify.

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K V Subba Rao

K V Subba Rao (Expert)
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21 February 2009 Q-1: "Medical insurance premium paid or reimbursed by an employer for an employee or any of his family members under an approved scheme will not be treated as a perquisite" (Source: http://myiris.com/tax/salary.php)

Initial payment of Medical Insurance Premium by you does not entitle you to claim Sec 80D benefit since the amount has since been reimbursed by Employer which implies that expenditure is not incurred by you from out of your income suffering tax.