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Medical Reimburesment - liable for FBT?

Rajesh U. Ameta (Properitor) (63 Points)

29 May 2009

If employees CTC consist of Medical Reimburesment to the extend of Rs. 15000/-, whether liable of FBT?

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7 Replies

Sourabh Sharma (CS CA (Final) M.com NCFM Derivative Capital Market Mutual Funds) (771 Points)
Replied 29 May 2009

Medical reimbursement up to Rs. 15,000 per annum would be subjected to FBT. However over and above this sum it would not be subjected to FBT. While explaining the logic the Central Board of Direct Taxes has clarified that at present, if any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and it exceeds Rs. 15,000 during the year, such sum is "salary" as defined in clause (1) of section 17 of the Income-tax Act and liable to income-tax in the hands of the employee. There is no change in this position. Since such sum is taxable in the hands of the employee, the same is not liable to FBT.

However, if any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and does not exceed Rs. 15,000 during the year, such sum does not fall within the meaning of "salary" as defined in clause (1) of section 17 of the Income-tax Act and not liable to income-tax in the hands of the employee. There is no change in this position. Since such sum is not taxable in the hands of the employee, the same is liable to FBT. The Central Board of Direct Taxes has further clarified that expenditure incurred at hospital/dispensary not maintained by employer in respect of injuries during the course of employment would be subjected to FBT except where it is a statutory obligation.

Hope ur query is solved.

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Jitendra Jain (Audit and Assurance Division) (497 Points)
Replied 30 May 2009

I belive it is wrong opinion given by Mr.Sourabh.

Medical Reiumbursement upto 15,000 is exempted in the hands of Employee, also the employer is not liable to pay FBT on such amount, Reimbursement over and above 15,000 is liable to FBT in the hands of Employer.

N.J.R (Practice) (346 Points)
Replied 30 May 2009

Saurabh's view is correct. Refer GN on Audit of FBs (pg. 51)

CA. Narendra Kumar (ACA ...ACS) (81 Points)
Replied 30 May 2009

dear..

medical reimb. upto 15000 p.a is liable for FBT and above this amount shall be taxable in hand of eployess.

this is a basic conceot any benefits which provided by eployer to eployee shall be taxable

either in hands of eployer or above such limt shall be taxable in the hand of employees.

Regards.

Narendra

PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 30 May 2009

Saurabh's view is correct

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Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 16 June 2009

Question 69 of CIRCULAR NO.8/2005 on medical reimbursement states as under:

69. Whether medical reimbursement upto Rs. 15,000/- (exempt in the hands of the employees) and medical reimbursement over Rs. 15,000/- (taxed as perquisite in the hands of the employee) is liable to FBT?

Ans. At present, if any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and it exceeds Rs. 15,000/- during the year, such sum is salary as defined in clause (1) of section 17 of the Income-tax Act and liable to income-tax in the hands of the employee. There is no change in this position. Since such sum is taxable in the hands of the employee, the same is not liable to FBT.

Hence Saurabh's view is correct.