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Exemption on Medical Reimbursement

What is medical reimbursement?

Many companies offer the facility of medical reimbursement to their employees. This is in addition to the group life cover offered by the employer. Let us learn more about medical reimbursement.

Medical reimbursement is the amount which the employer pays to the employee in order to reimburse a part of health expenses incurred by the employee. The current amount stands at ₹15,000 as per the Income Tax Act on medical reimbursement paid by the employer.

The Finance Minister Mr. Arun Jaitley introduced Standard Deduction in Budget 2018 which has replaced the medical reimbursement of Rs. 15,000 per annum.

What is the Eligibility to Claim Medical Reimbursement?

The Income Tax Act has pre-defined certain conditions for eligibility. Mentioned below are the same.

  1. The amount spent by an employee should be on medical bills only.
  2. The amount must be spent on the employee or their family member’s medical treatment.
  3. Such an amount is eligible for medical reimbursement.

Family includes wife, children, parents, brother/sister of the employee or dependents of the employee.

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Conditions for Reimbursement

Following are the conditions under which reimbursement is granted

  1. The first condition is to submit all the medical bills to your employer.
  2. The bills need not belong to a government or specific hospital.
  3. Bills from private clinics/hospitals etc. are applicable for medical reimbursement
  4. In case of an amount greater than ₹15,000/-, the excess amount will be added to the salary of the employee and will be added to their taxable income at the time of filing an ITR.

How much amount can be claimed?

As per the Income Tax Act, 1961 an amount of ₹15,000/- can be claimed by an employee as a tax benefit. The reimbursement amount will only cover expenses incurred on medical bills.

How to claim Medical Reimbursement?

You can simply submit the original medical bills to your employer and they would reimburse the expenses, subject to the overall limit of ₹15,000 without tax deduction.

Tax-free Prerequisites for Medical Reimbursement

As per Sec 17(2), the following prerequisites are considered tax-free.

  1. Medical bills of family members of the employee or themselves, treated in a hospital maintained by the employer.
  2. Medical bills of family members of the employee or themselves, treated in government hospitals or hospitals maintained by local authorities or government approved hospitals.
  3. Medical bills for the treatment of prescribed diseases or ailments listed in the Rule 3A of the Income Tax Rules.
  4. Medical bills paid towards insurance premiums made by the employer as a payment for employee’s health cover.
  5. Reimbursement towards insurance premiums for the employee/employee’s family under Section 80D of the Income Tax Act, 1961.

Medical Reimbursement vis-a-vis Medical Allowance

Medical reimbursement is a tax-free component which is exempted upto ₹15,000 spent by an employee on medical treatment. Medical allowance is a fixed amount given via salary on a monthly basis. This is taxable as salary income and you do not have to submit any medical bills under the same.

Frequently Asked Questions

Can I make a claim form the previous years?

No, you can only make a claim under medical reimbursement for the respective financial year and not of previous financial year.

Can medical insurance premium be considered under medical reimbursement?

No, medical insurance premium is different from medical reimbursement. Mediclaim premium paid comes under deductions mentioned as per Section 80D of the Income Tax Act, 1961.

Is there any upper limit for expenditure incurred in hospitals maintained by the employer?

No, there is no such upper limit in case of reimbursements for medical expenditure availed at hospitals maintained by the employer, or Government or local authorities, or hospitals approved under Central Government Health Schemes.