All about taxability of medical reimbursement received and medical expenses paid from income Tax perspective
All of us in our day to day life are incurring medical expenses either for ourself or for the dependent family members like spouse, children, parents, brothers and sisters.
In this article we are going to talk about the funding of these medical expenses and income tax treatment of these expenses and reimbursements thereof (if any).
There are primarily three ways of funding your medical expenses:
1) To pay medical expenses out of your own source (It happens in case of non-insured self employed persons or for non-insured salaried people where employer does not provide any medical benefit)
2) Medical reimbursement provided by employer (in case of salaried people only)
3) Medical reimbursement provided by medical insurance company against the mediclaim policies taken (applicable for both salaried as well as non-salaried people).
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1) Income Tax treatment in case of self financed medical expenses:
In case of self financed medical expenses (i.e from own source) there is no income to the person who has incurred expenses. Hence the question of chargeability of tax does not arise.
Now the question arises, “Whether such expenses can be treated as allowable expenditure under Income Tax”?
In case of salaried person who is not provided with any medical benefit by his employer and who does not have any medical insurance policy, no income tax benefit of medical expenses will be available to them.
In case of self employed persons, medical expenses incurred on him or his dependent family members would be treated as personal expenses and would not be allowed as business expenditure (as held by Delhi High Court in the case of Shanti Bhushan vs Commissioner Of Income Tax ).
So in case of sole proprietorship and partnership business the medical expenses incurred by the proprietor or partner would be a disallowable expenses. However if they provide medical facilities to their employees then such medical expenses for employees only will be allowable expenditure for Income Tax calculation.
However in the case of a company even the directors are treated as employees of the company since the company has a separate legal entity, so medical expenses incurred by directors and reimbursed by the company would be an allowable expenditure for the company.
2) Income Tax treatment in case of salaried person who are provided with medical benefit:
This is dealt in section 17(2) of the Income Tax Act as perquisite.
The whole amount of expenses incurred by the employer will be allowable expenditure to such employer under Income Tax Act.
In case of salaried person who is provided with medical allowance the whole amount will be taxable.
The medical facility in India provided to the employee or his dependent relative (i,e children, spouse, brothers, sister and parents) by his employer will not be chargeable to tax to the extent of the following:
a) Medical facility provided in a Hospital owned/maintained by the employer.
b) Medical facility provided in a Hospital of Central Government/ State Government/ local authority.
c) Medical facility provided in a Private hospital if it is also recommended by the Government for the treatment of Government employees,
d) Medical facility provided for Specified medical facility (given in rule 3A) in a hospital approved by the Chief Commissioner of Income Tax.
e) Health insurance premium – Medical insurance premium paid on behalf of the employee or reimbursed to the employee by the employer is not chargeable to tax in the hands of the employee.
For medical facility provided outside India the following perquisite will not be chargeable to tax subject to the condition mentioned therein:
| Perquisite not chargeable to tax | Conditions to be satisfied |
| Medical treatment of employee or any member of family of such employee outside India | Expenditure shall be excluded from the perquisite only to the extent permitted by the Reserve Bank of India |
| Cost of stay abroad of the employee or any member of the family for medical treatment and cost of stay of one attendant who accompanies the patient in connection with such treatment | Expenditure shall be excluded from the perquisite only to the extent permitted by the Reserve Bank of India |
| Cost on travel of the employee / any member of his family and one attendant who accompanies the patient in connection with treatment outside India | Expenditure shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the expenditure on travelling, does not exceed Rs. 2,00,000 |
3) Income Tax treatment in case of medical insurance reimbursement under mediclaim policy (for both salaried as well as non-salaried people):
Money received through a claim under a medical policy is only a reimbursement of expenditure already incurred by the policyholder. As this does not amount to profit or income for the insured person, this money is not taxable.
Apart from that any amount paid as medical insurance premium will be allowed as deduction u/s 80D to the maximum of Rs 1,00,000 (detail below) provided payment is made by cheque;
- In case of the individual, Rs. 25,000 for himself and his family
- If individual or spouse is 60 years old or more the deduction available is Rs 50,000
- An additional deduction for insurance of parents (father or mother or both, whether dependent or not) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 50,000 if parents are 60 years old or more.
- For uninsured super senior citizens (80 years old or more) medical expenditure incurred up to Rs 50,000 shall be allowed
- A deduction of Rs. 5000 will be allowed under this section for payment of preventive health check-up of either the individual himself or his family members which includes spouse, parents and dependent children.This deduction is NOT in addition to the deduction of Rs.25000/50000 stated above, but is included in the above deduction.
Hence we can summarise the above provisions as below:
1) In case of self employed person he can not claim any tax benefit of medical expenses incurred on him or his family as it would be treated as his personal expenditure.
2) Any amount received from the Insurance company under a medical policy will not be treated as income of the insured person as it is not a profit or income to the insured person but only a reimbursement.
3) For salaried employees if the employer pays medical insurance premium on behalf of the employee or give reimbursement of medical insurance premium to employee then this amount will not be chargeable to tax in the hands of employee.
4) Medical facility provided in Govt hospital / hospital maintained by employer / Govt recommended hospital will not be taxable in hands of employee.
5) Medical facility provided for specified diseases in a Hospital approved by the Chief Commissioner of Income Tax will not be taxable in hands of employee.
6) For medical insurance premium paid the maximum deduction of Rs 1,00,000 can be availed u/s 80D.
Click here to read Other Articles of CA Srikant Agarwal
(Republished with Amendments by Team Taxguru)
Author Bio
As per exemption of medical perk tax , in case govt recommended to the govt employee to treat even private hospital , the medical expenses are exempted from tax . In case of psu hospital refer to treat to a private hospital to its employees , the medical expenditure will the treated as non taxable perks
sir
i get medical checkup reimbursement of rs 4500/-. i got check up done for full amount. is it taxable
I have received advance for medical treatment of my mohther and i am in govt. job. I have received Rs.150000/- in advance. whether this amount is tax free or taxable
I am the employee in the central government. I have claimed the medical expenses by submitting the bills. However, in the salary slip, the amount that were reimbursed by the employer for my medical expenses are added to my salary and shown as an additional income . Is that correct??
I am the employee in the central government. I have claimed the medical expenses by submitting the bills. However, in the salary slip, the amount that were reimbursed by the employer for my medical expenses are added to my salary and shown as an additional income . Is that correct??
Sir,
I am retired Central Government Employee.
In 2018, due to Brain stroke I was admitted in Government listed hospital for Brain surgery and 1.50 lacs hospital expenditure was paid by me.
In 2022 Rs 1.30 lacs received as a reimbursement from mu department.
Now this whole amount may be treated as Tax Free?
Dear sir,
I did payment of Rs 78000 including pharmacy, pathology, hospital bill via digital mode on my 7 day old baby boy who is admitted for infection in private hospital in the month of Aug 2020. Because in mediclaim policy it is not covered.
Can I claim for tax deduction. How to claim. Which section ?
Kindly advise. Thank you.
Sir I want to ask about 80 D. If I have the medical expenditure of 1 lakh 70000 and I got 1 lakh 40000 in reimbursement. The left 30000 can I claim in 80D. Pls clarify me. I shall be very thankful to you
I have a mediclaim policy.A Bank retiree I have incurred a sum of Rs.74000 for my own treatment.The insurance company has settled my claim for Rs.68000.Can l claim deduction under sec.80DDB?
I am a salaried PSU/Govt. employee getting medical benefit from my employer. As per section 17(2) of the Income Tax Act, amount paid to employee towards medical treatment in Govt. Hospital is exempted from income tax. I consulted a doctor in a Govt. hospital and with his prescription purchased medicines from a private pharmacy. As per my employer, to get tax exemption the amount should be paid to the Govt. hospital only and as I have purchased medicines from pvt. pharmacy, tax exemption should not be there. As I understand, there is no such mention in the income tax guidelines for the same and the treatment (amount spent) taken with the prescription of govt. hospital should be tax free. Please advise.
i want to know that medical reimbursement given to employee as Rs. 1 lakh how rebate he gets or whether this is a income added to his gross income for incometax for ex. salary 20 lakhs plus 1 lakhs as medical reimbursement total we can take as 21 lakhs
Pls. specify the status of hospital.
is dealt in section 17(2) of the Income Tax Act as perquisite.
The whole amount of expenses incurred by the employer will be allowable expenditure to such employer under Income Tax Act.
In case of salaried person who is provided with medical allowance the whole amount will be taxable.
The medical facility in India provided to the employee or his dependent relative (i,e children, spouse, brothers, sister and parents) by his employer will not be chargeable to tax to the extent of the following:
a) Medical facility provided in a Hospital owned/maintained by the employer.
b) Medical facility provided in a Hospital of Central Government/ State Government/ local authority.
c) Medical facility provided in a Private hospital if it is also recommended by the Government for the treatment of Government employees,
d) Medical facility provided for Specified medical facility (given in rule 3A) in a hospital approved by the Chief Commissioner of Income Tax.
e) Health insurance premium – Medical insurance premium paid on behalf of the employee or reimbursed to the employee by the employer is not chargeable to tax in the hands of the employee.
Sir
Good Evening. Iam a Tamilnadu State Government servant. The employee spent sum money for health of his family and self and submit the bill and reimburse the expenses from the employer(15% of basic pay only for the FY). Medical allowance not provided to those who are getting medical reimbursemet. My question is the above said amount ie medical reimbursement amount is taxable or not.
If I have taken treatment in private hospital regarding which I came to know about IT certified exempted hospital status and my employer has deducted the tax considering perquisite, how can I take refund in IT return as hospital was later found as income-tax exempted hospital??
You can claim the same as at the time of filing your IT return. For exact column and field in new IT return format you can consult your return preparer.
I am senior citizen and retired govt person(undertaking). My ex company reimburse medical expanses for me & my wife(both Sr Citizen) when I consult privately and place medical bill to our company. I have yearly medical reimbursement limitation of ₹ 74000 for both of us togather. My questions are:-
1) Whether total reimbursed amount/annum i.e ₹ 74,000 will be considered as my taxable income or I can claim some deduction while filling IT return.
2) Since both of us(me & my wife files IT return every year) produces seperate medical bills and reimbursement amount is seperately available for both of us,can both of us claim IT deduction while filling IT return?
The whole amount is taxable under the head salary in the hands of ex-employees. However standard deduction of Rs 50000 is available.
In case of medical expenses for covid whole amount would be exempt