[OMITTED BY CIRCULAR NO. 603, DATED 6-6-1991]
Valuation of reimbursement of medical expenses/medical facilities by the employer–Instruction regarding.
Circular Number: 336, dated 6-4-1982 [F. No.200/108/77-ITAI]
All Commissioners of Income-tax.
Subject : Valuation of reimbursement of medical expenses/medical facilities by the employer-Instruction regarding.
Circular No. 33, dated 1-8-1955, stated, inter alia, that the following amenities are not to be included in the total income of an employee, as a part of the perquisites provided by the employer:
(i) Provision of ordinary medical facilities to the employee or his family free of charge;
(ii) Reimbursement of such medical expenses to the employee after they are incurred.
2. Subsequently at page 50 of the priced publication “Filing of Income-tax Return by Non-Corporate, Non-Business Taxpayers” as a part of the Taxpayer Information Series issued by the DI (Publication and Public Relations), it was, inter alia, stated:
“Reimbursement of medical expenditure incurred in the case of directors/managers, etc., for self and family, in excess of one month’s salary in a year with a ceiling of Rs. 5,000 per annum or three months’ salary with a maximum of Rs.15,000 for a period every three years of service, will be treated as perquisite and taxed as such.”
3. The Board have received representations that in disregard of the Board’s earlier instructions of 1955, ITOs are reopening the assessments of employees on the basis of the statement made in the priced publication referred to above. A request has been made that the Board should reiterate its earlier instruction of 1955.
4. After carefully considering the matter, the following clarification is issued with the approval of the Central Government.
5. The provision of ordinary medical facilities made by an employer to an employee or his family free of charge or reimbursement of such medical expenses to the employee after they are incurred by him, is not to be included in the total income of the employee provided that such amount does not in any financial year exceed one month’s salary of the employee. “Salary” for this purpose will include dearness allowance, where paid, but will not include any other allowance/perquisite. This will apply to all classes of employees, including managers/directors.
6. These instructions may be brought to the notice of all officers working in your charge.
(Sd.) V.B. Srinivasan,
Secretary, Central Board of Direct Taxes.