Valuation of Medical facilities to salaried person.

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whether the medical reimbursement given to an employee against medical bills submitted by them for Rs. 15000/-(maximum limit) is it taxable or does it have any effect on the gross income of an employee? Is there any exemption to this amount?



Whether to take this income of any employee into account while calculating Income Tax while preparing Form 16.?

Also if the employee claims medi claim policy reimbursement from the employer for the insurance premium paid does this becomes a part of his gross income & whether tds should be deducted in this amount?



Dear Bhatt Ji,

Before answer to your query ,Details of Valuation of Medical Facilities are given hereunder for reference.Following facilities will not be included in Income of employee.
  1. Medical facility provided in a hospital,clinic ,dispensary or nursing home maintained by the employer.
  2.  Reimbursement of medical expenditure by the employer, incurred by employee on his or treatment of his family member.
    • in any govt hospital (including dispensary /clinic or nursing home) or 
    • hospital (including dispensary /clinic or nursing home) maintained by Local authority or approved for govt employees .
  3. Value of medical treatment for prescribed diseases or ailments in any hospital approved by the Chief Commissioner of Income tax.For claiming this benefit the employee needs to attach with his income-tax return a certificate from the hospital specifying the disease or ailment and receipt for the amount paid.(from ay 2008-09 nothing is to be attached with ITR form)
  4. Besides, any sum paid by the employer towards medical reimbursement other than as discussed above is exempt up to Rs.15,000/-. 
  5.  Any portion of premiums paid by the employer for health insurance of the employees(group insurance) under schemes approved by the Government or the Insurance Regulatory and Development Authority.
  6. Any sum paid (reimbursement)by the employer in respect of premium paid by the employee for the health (medi claim policy)of his or his family, under schemes approved by the Government or the Insurance Regulatory and Development Authority that qualifies for deduction under section 80D of the Income-tax Act.
  7. Expenditure incurred by the employer on medical treatment of the employee or his family member for medical treatment.outside India. This includes travel and stay abroad of the employee or the family member plus one attendant who accompanies the patient in connection with the medical treatment. This exemption is subject to the condition that:
    • the expenditure excluded from the perquisite value shall be to the extent permitted by the Reserve Bank of India;and
    • the travel expenditure is excluded only if the gross total income of the employee before including such travel expenditure does not exceed Rs. 2 lakhs. 


so other than above the medical facility is taxable in hands of employee.Treatment amount ,reimbursement , unapproved /non govt Hospital other than as explained in point no 2 above  up to 15000 is not be  included in salary and amount in excess of 15000 is to be included in employee's salary.


Now point wise answer to your queries.


whether the medical reimbursement given to an employee against medical bills submitted by them for Rs. 15000/-(maximum limit) is it taxable or does it have any effect on the gross income of an employee. Is there any exemption to this amount. 



  • As explained above, valuation of reimbursement upto 15000 rs per annum in non approved /non govt hospital is to be taken as nil .so the amount up to 1500o per annum have no effect on gross Income of an employee.Please note that this is under valuation rule and not an exemption.


Whether to take this income of any employee into account while calculating Income Tax while preparing Form 16.?



  • The answer is yes,If the amount is taxable in employee's hand then we have to show it in Form 16.In form 16 ,there is sub part of gross salary part 1(b) "value of perquisites under section 17(2)",so under this head we will show amount taxable from the facility of medical treatment.But if value of medical facility is nil as per above details then nothing is to be shown .Form 12BA for valuation of perquisites is also required to be issued ,where there is a value of perquisites has been added in the income of the employee.
if the employee claims mediclaim policy reimbursement from the employer for the insurance premium paid does this becomes a part of his gross income & whether tds should be deducted in this amount?



  • Amount reimbursement for mediclaim policy by employer , is also exempted as given above ,(point no 6)  hence not to be included  in employee's salary so no TDS is required to be deducted.If any reimbursement which is not covered under above rules then that amount is top be included in employee salary ,tds is also to be deducted and detail are also required to be shown in form 16 and 12BA.
For example RaJiv has taken following medical facilities from his employer .

  1. Treatment form Hospital maintained by employer(appox expenses 100000):Noting is taxable as medical facilty value for Income tax purpose is NIL.
  2. Treatment in Govt Hospital :Hospital bill 2000 and medicine purchased from private shop against treatment in govt hospital:20000:Full 20000+2000 is not to be included in salary as the treatment in govt hospital.
  3. Treatment in pvt Hospital  amount Rs 25000: In this case 15000 is exempted and 10000 is taxable.
so In above example from 147000(100000+22000+25000) only 10000 is taxable in rajiv 's hand and on this 10000 tds is required to be deducted and this 10000 amount will also be shown in Form 16 and form 12BA.
comments invited.

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