End of Financial year 2017-18 is now two months away, all salaried persons are busy in year-end Tax planning and considering various tax saving instruments like Life insurance, PPF, NSC etc., which can reduce their tax liability to some extent.
However, in our view tax planning is not just a selection of corrected tax saving scheme but we should also consider other aspects of scheme and our needs to achieve our financial goals. For example, we should not buy an insurance policy, just as a tax saving plan but we should first assess whether insurance is required for us. If yes, what should be the sum assured.
Further to save tax, in addition to tax planning, we should look into correct Tax calculation part also and to calculate tax correctly, you must have knowledge of related tax provisions. In this post, we have covered the tax provisions of Medical reimbursement by employer.
Medical Reimbursement by the employer exceeding Rs. 15,000/- p.a. u/s 17(2) is to be taken as a perquisite. It is further clarified that the method regarding valuation of perquisites are given in section 17(2) of the Act and in rule 3 of the Rules. The assessed may consider the related provisions carefully before they determine the perquisite value for Tax calculation purposes. If Medical reimbursement during a financial year is more than Rs 15000/- then amount more than Rs 15000/- is required to added in your Income under the Head Salary.
Though the Monetary Limit of exemption is Rs 15000/- but there are few specific exemptions available to employee for medical reimbursement which has been explained as under.
(a) the value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer;
(b) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or of any member of his family:
- (i) 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;
- ii) in respect of the prescribed diseases or ailments as provided in Rule 3A(2) of the Rules in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines as provided in Rule 3(A)(1)of the Rules,
(c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government or Insurance Regulatory and Development Authority) or reimbursement of insurance premium to the employees who take medical insurance for themselves or for their family members (under any scheme approved by the Central Government or Insurance Regulatory and Development Authority);
(d) reimbursement, by the employer, of the amount spent by an employee in obtaining medical treatment for himself or any member of his family from any doctor, not exceeding in the aggregate Rs. 15,000/- in an year;
(e) As regards medical treatment abroad, the actual expenditure on stay and treatment abroad of the employee or any member of his family, or, on stay abroad of one attendant who accompanies the patient, in connection with such treatment, will be excluded from perquisites to the extent permitted by the Reserve Bank of India. It may be noted that the expenditure incurred on travel abroad by the patient/attendant, shall be excluded from perquisites only if the employee's gross total income, as computed before including the said expenditure, does not exceed Rs.2 lakhs.
For the purpose of availing exemption on expenditure incurred on medical treatment, "hospital" includes a dispensary or clinic or nursing home, and "family" in relation to an individual means the spouse and children of the individual. Family also includes parents, brothers and sisters of the individual if they are wholly or mainly dependent on the individual
Question: Calculate Taxable value of Medical reimbursement from following:
1. Ram has taken outdoor medical treatment of wife from Government Hospital Rs 50000/-
2. Ram taken treatment of brother (wholly depended on him) from company owned hospital, value of treatment is Rs 70000/-
3. Company has paid Health insurance premium of Rs 7000/-
4. Ram has taken treatment of his children from private hospital Rs 28000/-
5. Ram has taken treatment of his father (wholly dependent on him) from abroad Rs 3 lakh expense approved by RBI.
1. As the treatment is taken from Government Hospital Value of perquisite will be taken as Nil
2. As the treatment is taken from company owned hospital Value of perquisite will be taken as Nil
3. Reimbursement of Health insurance premium is also exempted
4. Treatment from private hospital will be added from prerequisite value to be Rs. 28000/-
5. Reimbursement of amount of Treatment of Father dependent on Ram from abroad is exempted as per actual subject to approval from RBI, so not considered for valuation
So out Rs 28000/- (sr no 4) Rs 15000/- is exempted and Rs 13000/- will be added in income as pre-requisite.