Application by Hospital Seeking Approval for Claiming Nil Perquisite by a Salaried Employee on Medical Expenses
Introduction: In the complex landscape of tax regulations, understanding perquisites and their implications on employee benefits is crucial. This article explores the nuanced realm of claiming nil perquisites by a salaried employee on medical expenses and the intricate process hospitals must navigate to secure approval under Section 17(2) and Rule 3A of the Income Tax Act, 1961.
Definition of Perquisite
Perquisite may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages.
As per section 17(2) of the Income Tax Act, 1961, perquisite includes
- Value of rent free accommodation provided by the employer
- Value of any concession in the rent with reference to the accommodation provided by the employer to the employee
- Any sum paid by the employer to the employee in respect of any obligation that was actually payable by the employee
- Value of any benefit or amenity granted by the employer to any specified employee at a free or concessional rate
- Value of specified security or sweat equity shares allotted or transferred, directly or indirectly by any employer or former employer, free of cost or at concessional rate to the employee
- Any sum payable by the employer, whether directly or through a fund other than a recognised provident fund or a superannuation fund to effect an assurance on the life of the employee or to effect a contract for annuity
- The amount or the aggregate of amounts of any contribution made to the account of the employee by the employer in a recognised provident fund, in a scheme referred to in 80CCD(1) and an approved superannuation fund to the extent it exceeds Rs. 7,50,000/- in the previous year and the annual accretion by way of interest or dividend on balance in the above funds exceeding the limit specified during the previous year.
- Value of any other fringe benefits or amenity.
Medical Expenses not Chargeable to Tax as Perquisite
Proviso to section 17(2), of the Income Tax Act, 1961, states that any expense incurred or reimbursed by the employer for the medical treatment of the employee or his family i.e spouse, children, dependent- parents, brothers and sisters, in any of the following hospital is not chargeable to tax in the hands of the employee-
- Hospital is maintained by the employer
- Hospital is maintained by the government or local authority or any other hospital approved by the government for treatment of its employees
- Hospital is approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed treatment of prescribed diseases as stated in Rule 3A of Income Tax Rules, 1962.
Procedure for Seeking Approval from Principal Chief Commissioner or Chief Commissioner
In order for any medical expenditure incurred or reimbursement of medical expenditure by the employer for treatment of the employee or his family to be not charged to tax in the hands of employee in hospitals other than those maintained by the employer or maintained by the government or local authority or approved by the government, the hospital must have obtained approval from the Principal Chief Commissioner or Chief Commissioner.
The hospital shall write an application to the Principal Chief Commissioner or Chief Commissioner, seeking the approval under section 17(2) read with rule 3A. The application shall specify about the compliance of conditions laid down in Rule 3A, of Income Tax Act, 1962. The following documents shall be attached with the application-
1. Certificate of incorporation or partnership deed of the hospital
2. Hospital Registration Certificate from the Local Authority
3. Trade License
4. Building Plan
5. Rental Agreement if the property is not owned by the hospital
6. Occupancy certificate
7. Fire Safety Certificate
8. Certificate from the state pollution board
9. List of doctors employed with the hospital along with the copy of certificate issued to the doctor from the medical council
10. List of nurses employed with the hospital along with the copy of certificate issued to the nurse from the nursing council.
Upon receipt of application the Principal Chief Commissioner or Chief Commissioner shall satisfy himself that the hospital is registered with the local authority and also fulfills the conditions laid down in Rule 3A. The authority has the right to call for any information or explanation as it may deem appropriate for the above purpose.The authority shall also send a team for inspection of the hospital to satisfy himself about the compliance of the conditions prescribed.
The team shall report its findings during the course of inspection to the Principal Commissioner or Chief Commission. Upon examination of the report submitted by the team sent for inspection and verification of all the documents, details and explanations available the Principal Commissioner or Chief Commissioner shall decide whether to issue an order of approval or rejection, as the case may be.
Rule 3A of Income Tax Rules, 1962
Criteria to be met for seeking approval under section 17(2) of the Income Tax Act is laid down under rule 3A(1) of the Income Tax Rules, 1962. The same is listed below-
|
(i) |
The building used for the hospital complies with the municipal bye-laws in force. |
| (ii) | The rooms are well ventilated, lighted and are kept in clean and hygienic conditions. |
| (iii) | At least ten iron spring beds are provided for patients. |
| (iv) | At least one properly equipped operation theater is provided, with minimum floor space of 180 square feet and with a separate sterilization room. |
| (v) | At least one labor room is provided, with minimum floor space of 180 square feet, in case the hospital provides medical service for maternity cases. |
| (vi) | Aseptic conditions are maintained in the operation theater and the labor room. |
| (vii) | A duty room is provided for the nursing staff on duty. |
| (viii) | Adequate space for storage of medicines, food articles, equipment, etc., is provided. |
| (ix) | The water used in the hospital or nursing home is fit for drinking. |
| (x) | Adequate arrangements are made for isolating septic and infectious patients. |
| (xi) | The hospital is provided with and maintains :— |
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|
(a) |
high pressure sterilizer and instrument sterilizer; |
| (b) | oxygen cylinders and necessary attachments for giving oxygen; |
| (c) | adequate surgical equipments, instruments and apparatus including intravenous apparatus; |
| (d) | a pathological laboratory for testing of blood, urine and stool; |
| (e) | electro-cardiogram monitoring system; |
| (f) | stand-by generator for use in case of power failure. |
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(xii) |
There is at least one qualified doctor available on duty round the clock for every twenty beds or fraction thereof. |
| (xiii) | In hospitals providing intensive care unit facilities, there are at least two qualified doctors available on duty round the clock exclusively for such intensive care units. |
| (xiv) | One nurse is on duty round the clock for every five beds or a fraction thereof. |
| (xv) | In hospitals providing intensive care unit facilities, there are at least four nurses provided exclusively for every four beds or fraction thereof for such intensive care units. |
| (xvi) | The hospital maintains a record of the health of every patient containing information about the patient’s name, address, occupation, sex, age, date of admission, date of discharge, diagnosis of disease and treatment undertaken. |
As per Rule 3A(1A), in granting approval to any hospital for Indian system of medicine and homeopathic treatment for the purposes of sub-clause (b) of clause (ii) of the proviso to sub-clause (vi) of clause (2) of section 17, the Chief Commissioner shall satisfy himself that the hospital fulfills the conditions specified vide Office Memorandum dated the 6th June, 2002, by the Department of Indian Systems of Medicine and Homoeopathy, Ministry of Health and Family Welfare for approval of private hospitals for Indian system of medicine and homeopathic treatment to Central Government Health Scheme beneficiaries and Central Government employees.
As per Rule 3A(2), for the purpose of sub-clause (b) of clause (ii) of the proviso to [sub-clause (vi) of] clause (2) of section 17, the prescribed diseases or ailments shall be the following, namely :—
|
(a) |
cancer; |
| (b) | tuberculosis; |
| (c) | acquired immunity deficiency syndrome; |
| (d) | disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gallbladder, digestive system, endocrine glands or the skin, requiring surgical operation; |
| (e) | ailment or disease of the eye, ear, nose or throat, requiring surgical operation; |
| (f) | fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopedic treatment; |
| (g) | gynecological or obstetric ailment or disease requiring surgical operation, cesarean operation or laparoscopic intervention; |
| (h) | ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days; |
| (i) | gynecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days; |
| (j) | burn injuries requiring medical treatment in a hospital for at least three continuous days; |
| (k) | mental disorder – neurotic or psychotic – requiring medical treatment in a hospital for at least three continuous days; |
| (l) | drug addiction requiring medical treatment in a hospital for at least seven continuous days; |
| (m) | anaphylactic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days. |
Conclusion: Navigating the intricacies of claiming nil perquisites on medical expenses demands a comprehensive understanding of tax laws and meticulous adherence to specified criteria. For hospitals, achieving approval involves not only fulfilling infrastructure norms but also meeting stringent medical and administrative prerequisites. This article serves as a guide, shedding light on the procedural intricacies and essential considerations for both employees and hospitals in optimizing tax benefits related to medical expenses.
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How to renew the approval ,what all are the docments need for the renewal procedure