As per the income tax circular No. 603, dated 6-6-1991 which says that,
"the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment incurred by his employee on himself or on his spouse, children or parents, including the provision of free medical treatment or treatment at a concessional rate, will not be included in the taxable salary of the employee in the following cases:
(i) Where the medical treatment is availed at hospitals, clinics, etc., maintained by the employer;
(ii) Where the medical treatment is availed of at hospitals maintained by the Government or local authorities or hospitals approved for the purposes of the Central Government Health Scheme or Central Medical Scheme
(iii) Where the expenditure is on medical insurance premia;
(iv) Where the medical treatment is availed of from any doctor outside the institutions/schemes mentioned in (i) to (iii) above an expenditure of up to Rs. 10,000 in a year, in the aggregate; and
(v) Where the medical treatment is availed of in a hospital outside India and the expenditure is incurred for treatment (including on travel and stay abroad in connection with such treatment) as also on travel and stay abroad of one attendant, to the extent permitted by the RBI, subject to the condition that the amount qualifying for such tax exemption would not include expenditure incurred on travel in the case of employees whose gross total income, as computed under the Income-tax Act without considering the amount paid or reimbursed for expenditure in connection with medical treatment abroad, exceeds Rs. 1,00,000.”
Further, as per Proviso to section 17(2) which says: -
“1) Expense incurred or reimbursed by the employer for the medical treatment of the employee or his family (spouse and children, dependent - parents, brothers and sisters) in any of the following hospital is not chargeable to tax in the hands of the employee:
a) Hospital maintained by the employer.
b) Hospital maintained by the Government or Local Authority or any other hospital approved by Central Government
c) Hospital approved by the Chief Commissioner having regard to the prescribed guidelines for treatment of the prescribed diseases.
2) Medical insurance premium paid or reimbursed by the employer is not chargeable to tax.”
According to the above 2 sources, I have understood following: -
- There is no bifurcation of expenses under income tax laws which are incurred during “Hospitalisation Vs. OPD/Non-Hospitalisation” and later on reimbursed by employer. Thus, both shall be treated at par for the purpose of availing tax exemption.
- "Proviso to section 17(2)" also uses the word "hospitals approved by Central Government" which means CGHS empaneled hospitals. Further, this clause 1(b) also doesn't talk about any prescribed disease which means "all the treatment be it hospitalized or OPD/Consulatation" carried out in these approved hospitals would be non-taxable.
Request you to please provide your inputs on whether my interpretation is correct or not?
CAclubindia
