The Income Tax Act allows individuals to claim various tax deductions and tax exemptions. A prominent exemption pertains to medical expenses incurred by an individual, for self and family, during a given financial year. Medical bills of salaried employees, reimbursed by employers, are not taxable. You do not have to pay tax on up to Rs.15,000 in a financial year if you submit medical bills for the same amount to the employer. The main conditions for claiming this exemption are:
- Medical bills incurred for self, spouse and children can be submitted for reimbursement. Medical bills of parents and siblings who are wholly dependent on the employee can also be claimed as reimbursement.
- These bills could be for the purchase of medicines from pharmacies and medical shops, or medical treatment taken at public or private hospitals and clinics.
- Medical bills should be reimbursed by the employer. You cannot submit medical bills to the IT department to claim reimbursement during the income tax return-filing process.
Medical Reimbursement Versus Medical Allowance:
Medical expenses of a salaried employee are generally covered by a company in 2 ways:
- Fixed medical allowance
Many companies allow employees to submit their medical bills and reimburse the expense incurred by them. Some companies even have tie-ups with hospitals and clinics where the employees can get medical treatments done and then reimburse the expenses. It is this reimbursable amount, submitted to the employer with bills and receipts, which is tax-free. Key points are:
- You can claim tax exemption only up to Rs.15,000 per year.
If you have spent more than Rs.15,000, the excess amount is taxable (even if the company reimburses the excess amount). If you have spent less than Rs.15,000 then only the incurred expense is tax-free. E.g. if your medical expense in a year, with supporting bills, was Rs.9,000, you will get a tax exemption of Rs.9,000 only out of the Rs.15,000 allowed.
- If you do not produce any medical bills to support your claim for reimbursement, the entire Rs.15,000 is taxable.
Some companies give medical allowance to its employees. This is a fixed regular benefit that an employee gets every month. If you are being paid a medical allowance, you cannot claim reimbursement from the company to reduce your taxable income. This medical allowance is fully taxable under the head ‘income from salaries’.
Benefits of Medical Reimbursement:
The main benefit of medical reimbursements is that it helps reduce taxable income of employees. The downside, though, is that in order to avail the tax benefits, medical bills worth Rs.15,000 need to be submitted.
Reducing Taxable Income through Medical Reimbursement - Example:
Ravi works for a company where his salary slip is as given below. He is paid a sum of Rs.1,250 every month under ‘Medical’.
|Employee No - 1234||Name - Ravi Bajaj|
|Joining Date - 21/2/2016||PF No - SB/AYE/1325746/132/1327465|
He falls ill for a few weeks and his medical treatment cost him Rs.8,000. He can submit the bills for this amount for reimbursement from the company. This will bring down the taxable income by Rs.8,000. The balance amount of Rs.7,000 will be taxable.
News About IT Medical Bills Exemption under Section 17(2)
Tax Breaks On Medical Expenses Might Be Hiked
The government is considering increasing the tax deductions on medical expenses and insurance policies in view of the rising medical costs. Sources say the medical reimbursement limit may be raised from Rs. 15,000 currently to Rs. 25,000.
Medical insurance premium for self, spouse and children currently gets a deduction of Rs. 15,000 annually. The government wants to encourage individuals to buy a higher insurance cover in order to be able to meet the rising hospitalisation expenditure. If more people can afford private hospitals, the pressure on government hospitals will decrease.
People often end up buying medical insurance policies in order to claim tax deductions and not exactly keeping their family’s needs in mind. A higher deduction will encourage such people to get a higher coverage.
10th June 2016
Release of Dearness and Medical Allowances Demanded by Pensioners
With dearness and medical allowance dues still not released by the government even after 23 months have elapsed, the Punjab State Pensioners Welfare Association (PSPWA) has come out swinging against the high-handedness meted out by the government towards pensioners in this regards. President of the PSPWA, Surjit Singh Goraya, stated that members of the association met to discuss about the problems that the pensioners face, and demanded that 50 per cent of the dearness allowance should be combined with basic pay. He also stated that pensioners should be doled out benefits in accordance with their demands, and not be harassed unnecessarily by government employees when visiting the government offices to conduct any work. Additionally, the PSPWA has demanded that Rs 1,000 be allocated as medical allowance with a 100 per cent increase in pensions for those individuals over the age of 80.
24th May 2016
Doctors, Class IV Staff get raise in Medical Allowance for Autopsies
The Haryana Government has increased the medical allowances for doctors and Class IV employees involved in conducting autopsies in civil hospitals.
While Class IV employees would now get Rs. 500 instead of Re. 1, doctors conducting post-mortem would get Rs. 1,000 instead of Rs. 10.
According to the state health department, on an average in a month, 20-25 autopsies are done in the civil hospitals of a district in Haryana. Most of the doctors were not even claiming their autopsy allowance because of the measly amount.
19th April 2016
Experts Say Budget For Health Sector Should Be Increased
In lieu of the increasing expense on medical care, experts have stated that the budget currently allocated for the health sector will have to be raised to meet the rapid growth rate of urbanisation. While the state government in Maharashtra had allocated Rs 2,296 crore to the health sector in 2015-2016, experts have stressed that the state will need to raise its spending to over Rs 7,400 crore to meet the rising medical costs and expenditure. The National co-convenor of the Jan Sawasthya Abhiyan, Dr Abhay Shulka, stated that while the World Health Organisation (WHO) has instructed every state government to earmark 5 per cent of the gross state domestic product on health care, the government of Maharashtra has allocated only 0.5 per cent towards the same sector.
17th March 2016