Now a days various hospitals are receiving email from TPA for getting confirmation whether they have certificate under proviso (ii)b of section 17(2) and hospital are like what is this provision? And were do we get that registration? Why this registration is not there? Does my existing business would affect due to not having certificate under proviso (ii)b of section 17(2)?. To address such tricky questions I endeavour to write about this issue in simple words.
Page Contents
- 1. What is the proviso (ii)b of section 17(2) under Income Tax Act?
- 2. Conditions for getting certificate under proviso (ii) b of section 17(2)?
- 3. What are the diseases or ailments covered in order to get benefit of section 17(2)?
- 4. What are the benefit of having certificate under section 17(2)?
- 5. What if not registration by Hospital under section 17(2), does it affect business of hospital?
- 6. What would be future possibilities about this provision?
- 7. What could be the possible reason of email from TPA’s for confirmation of 17(2) certificate?
1. What is the proviso (ii)b of section 17(2) under Income Tax Act?
Answer:
Section 17(2) deals with perquisite which are taxable in the hands of employees, however, provision (ii)b deals with situations were perquisite is not taxable in the hands of employee were;
(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family –
b) in respect of the prescribed diseases or ailments, in any hospital approved by the [Principal Chief Commissioner or] Chief Commissioner having regard to the prescribed guidelines.
Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;
2. Conditions for getting certificate under proviso (ii) b of section 17(2)?
Answer:
To obtain a certificate under proviso (ii)b of section 17(2), Rule 3(1) of Income tax act has laid down the below conditions:
The Chief Commissioner shall satisfy himself that the hospital is registered with the local authority and fulfils the following requirements, namely :—
| (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 theatre is provided, with minimum floor space of 180 square feet and with a separate sterilisation room. | ||||
| (v) | At least one labour 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 theatre and the labour room. | ||||
| (vii) | A duty room is provided for the nursing staff on duty. | ||||
| (viii) | Adequate space for storage of medicines, food articles, equipments, 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 :— | ||||
| (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. | ||||
| (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 unit. | ||||
| (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 unit. | ||||
| (xvi) | The hospital maintains record of 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. | ||||
If above conditions are fulfilled by hospital then hospital can apply to Chief Commissioner in prescribed from along with evidences supporting fulfilment of above conditions.
3. What are the diseases or ailments covered in order to get benefit of section 17(2)?
Answer:
Apart from above conditions stated in rule 3(1), hospital must be carrying out treatment of specified diseases as mentioned in rule 3(2), which are as below:
| (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, gall bladder, 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 orthopaedic treatment; | |
| (g) | gynaecological or obstetric ailment or disease requiring surgical operation, caesarean operation or laperoscopic intervention; | |
| (h) | ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days; | |
| (i) | gynaecological 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. |
4. What are the benefit of having certificate under section 17(2)?
Answer:
Those hospital registered u\s 17(2) can issue certificate for expenses incurred by Employees on specified diseases or ailments for his own or any member of his family. Based on certificate issued by hospital reimbursement amount received by employee from his employer would not be treated perquisite and no tax is required to be paid by employee for such additional benefits received from employer.
Further, Employer is also eligible to claim this amount as business expenses in his books of account. Therefore, it is not only beneficial to employee but to employer as well.
5. What if not registration by Hospital under section 17(2), does it affect business of hospital?
Answer:
As per my understating, the employee having Medical Insurance cover can get cashless claim or reimbursement for expenses incurred on medical treatment from insurance company. Further, Employer is generally relied on insurance companies, he do not want to make additional expenses for medical treatment of his employees.
Therefore, Hospital will keep rendering the services of such medical treatment without loosing out any business.
6. What would be future possibilities about this provision?
Answer:
Considering the government view on deductions claimed by employees, it seems government want to promote income without deductions , in order to make income tax calculations more simplified and curtail the risk of fake or bogus deductions. At present government of India has made “without deductions” method as default method for tax calculations, which further boost its view on deductions and I believe in future there would remain only without deduction method.
Therefore, In my personal view in future this provision will become obsolete and useless.
7. What could be the possible reason of email from TPA’s for confirmation of 17(2) certificate?
Answer:
There can be possibility that TPA or Insurance companies wanted hospital to be upgraded as per the conditions laid down in rule 3(1) of Income Tax Act, which will make hospital more lavish, equipped and updated.
Conclusion:
Obtaining certificate u\s 17(2) involve stringent conditions as listed in question no.02, which is difficult to observe in small hospitals. Further, even if not having such registration would not affect the existing business and considering further view of government this provision would become obsolete and won’t be useful .
Author Bio
My employer (A state PSU) has deducted tax on medical reimbursement paid for the expenses for medicines purchased by me from market and bills verified by hospital. Medicines were purchased as prescribed by a reputed private hospital in Delhi for long duration treatment of my wife in OPD for disease of heart and lungs. Hospital is recognised by my Organisation and also certified by Chief Commissioner IT. Can the refund be claimed and how?
Hello Dear Mahendra ji,
I am Sanjeev kumar Mahajan, Managing Partner of FACTS Asia a conglomerate of Professionals including CA, CS, CMA, Advocates, ISO Lead Auditors, RVO etc.
As we have some hospital clients. we are considering to gey the regn of these hospital under 17(2) provisio ii(b)
After going through your detailed Article on the subject matter I need your further guidance. My contact details are +91-9958421532, +91-8920679057.
You are requested to connect with me over the above what’s app numbers.
Look forward for hear a call or positive revert.
Regards
I need application format for applying exemption certificate us 17 of it act