Medical perquisites to employees: What is its tax treatment?

Medical perquisites are considered as tax free perquisites as per Income Tax Act. However there are certain cases where medical facilities are treated as tax free perquisites. You must read till end!

Read the overview of entire Salary head of Income Tax.

Medical facilities/reimbursement in India

  • The value of any medical treatment provided to an employee or any member of his family in any hospital, maintained by the employer;
  • Any sum paid by employer in respect of:
    • any amount actually incurred by the employee for obtaining his or his family member’s medical treatment either in any hospital, nursing home, clinics etc. up to a maximum of Rs.15000 in the previous year.
    • However there are following cases where the expenses incurred by employee for treatment shall be fully tax-free in addition of Rs.15000:-
      • actual expenditure incurred by employee on his or his family member’s treatment in any hospital maintained by the government or any local authority or hospital approved by government for medical treatment for treatment of its employees;
      • expenditure actually incurred by employee on his or his family member’s medical treatment in respect of prescribed diseases as prescribed in Rule 3A of the Income Tax Act Rules, in any hospital approved by the Principal Chief Commissioner of Income Tax.
    • Any portion of health insurance premium paid by the employer for employees under a scheme approved by the Central Government or the Insurance Regulatory and Development Authority.
    • Any reimbursement by the employer of any insurance premium paid by the employee, for employee or his family member’s health insurance, approved by the Central Government or the Insurance Regulatory and Development Authority is also a tax free perquisite.
Read about Perquisite of Motor vehicle and its valuation

Amendment made by the Finance Bill, 2018

From A.Y.2019-20, the exemption in respect of expenditure on Medical treatment is withdrawn, as the standard deduction of maximum Rs.40000 (Standard deduction of Rs.40000 or amount of salary, whichever is less) is introduced. This had removed Medical reimbursement of Rs.15000 and Transport allowance of Rs.1600 p.m. 
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Medical treatment outside India

Following expenditure incurred by employer on treatment of the employee or his family members outside India is also a tax free perquisite:

  1. Expenses on medical treatment of the employee or member of his family outside India. However such expenses shall be tax free perquisite to the extent permitted by RBI.
  2. Expenses on stay abroad of the employee or any member of family for medical treatment with one attendant. Such expenses shall be tax free perquisite to the extent permitted by RBI.
  3. Travel expenses of the patient and one attendant who accompanies the patient in connection with such treatment. It shall be tax-free in the case of those employee whose Gross Total Income does not exceed Rs.2,00,000.

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