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Taxability

sonam agarwal (Aricle) (33 Points)

19 February 2010

There is an employee who is suffering from Brain Cancer and for the treatement emplyoyer has reimbursed Rs. 240000.

Whether the same is taxable or exempted??

If Taxable than in whose hand?/If not how much amount is exempted?

Plz Reply Soon.

Thanks.

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3 Replies

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 19 February 2010

Dear Sonam,

Plz see the questionaire as well as its answer that may clarify your doubt.

Ques : I am working as senior resident in the surgery department of government medical college, Amritsar. My wife was suffering from breast cancer. She received treatment for the same from government medical college, Amritsar and DMC, Ludhiana. I spent about Rs 5,01,650. Now I am in receipt of Rs 5,01,650 from my department as re-imbursement of medical expenses. My DDO says that he will deduct income tax. However, I feel it is not taxable under provision to Sec 17 sub clause (i), (ii). Please clarify whether medical reimbursement paid to me by my department is taxable or not.

Ans: U/s 17 --- 1. The value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer and

2. any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family-

(a) in any hospital maintained by the government or any local authority or any other hospital approved by the government for the purposes of medical treatment of its employees;

(b) in respect of the prescribed diseases or ailments, in any hospital approved by the chief commissioner having regard to the prescribed guidelines. The employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital, are not to be treated as perks.

Moreover, Item-13 of CBDT Circular 9/2005 dated November 30, 2005 guiding DDOs on how to apply TDS states that such expenses incurred or reimbursed by the employer are exempt from tax.

The only reason why your DDO is levying TDS on this amount is because either he is making an error or the hospital does not pass the test laid down in the Sec 17.

In any case, you can certainly claim the refund while filing your tax returns.

regards,

ratan