CA Srikant Agarwal

CA Srikant AgarwalAll 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).

ID-100334769Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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.

f) Any other facility in India – Any other expenditure incurred or reimbursed by the employer for providing medical facility in India is not chargeable to tax up to Rs. 15,000 in aggregate per assessment year (fixed medical allowance is fully chargeable to tax).

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 60,000 (detail below) provided payment is made by cheque;

Type of deduction For Senior Citizen Others
Basic deduction Self, Spouse or dependant children 30,000 20,000
Additional deduction Parents 30,000 20,000

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 any amount received as medical allowance will be fully taxable but medical reimbursement to the extent of Rs 15,000 per assessment year will not be taxable.

4) 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.

5) Medical facility provided in Govt hospital / hospital maintained by employer / Govt recommended hospital will not be taxable in hands of employee.

6) 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.

7) For medical insurance premium paid the maximum deduction of Rs 60,000 can be availed u/s 80D.

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41 responses to “Tax on medical reimbursement received & expenses paid”

  1. PRASHANT SRIVASTAV says:

    health insurance amount received COMPANY HOW CAN MAKE THE ENTRY

  2. Sandeep Kalyankar says:

    Does Medical reimbursement received under Employees contributory scheme is taxable –
    In the case where employee is contributing for the scheme, fixed amount is deducted from his salary the scheme has tie up with private insurance company & employee is not getting any rebate under 80D.

  3. धनंजय पाटील says:

    मी एक सरकारी कर्मचारी असून मला माझ्या आईच्या मेंदूच्या operation साठी केलेल्या वैद्यकीय खर्चाची 650000अशी प्रतिपूर्ती reimbursement मिळाली सदर operation मी मुंबई च्या kem रुग्णालयात केलं आहे परंतु सि ए सांगतात की income tax भरावा लागेल
    यावर मार्गदर्शन मिळावे की सरकारी रुग्णालयात उपचार करूनही आयकर का भरावा my mobile no 9404972835

  4. I am an state govt employee I received Rs 188000 as medical reimbursement against my wife’s operation in this year is this amt is called income an d taxable under its act pl send me reply fast.

  5. Rajesh Chandran says:

    Against the medica reimbursements of Rs 15000 annually do we need to provide hard copies of the bills or scan copies can also be submitted through an email

    • BINOD KUMAR SINHA says:

      i am pensinor in bihar govt.i recived 1.25lac under my medi claim policy.pl say it is incomtaxable.

  6. ANIL KUMAR says:

    Is it advisable to take Medical insurance even if your Employer pay the expenses towards its employee and his dependent. And also the employer pays to the hospital in case of major ailments.

  7. Mahesh says:

    Hi,

    I have recently changed my job in August 2017 and have claimed entire 15000 of medical reimbursement in the initial few months of the financial year. In my full and final settlement, the employer had reversed around 11000 from my salary against medical reimbursement. Why they have deducted the amount when I have already submitted the bills and have claimed the 15000.

  8. J N DUTTA says:

    My employer deduct 1K pm for medical facility for my family (Spouse, Child, parents, My father is 65+). I also got reimbursement from my employer as per CHSS/CGHS rate. In FY16-17, I have claimed for reimbursement Rs. 53K and got reimbursement of 37.5K. I dont receive any medical allowance in my paybill. Will I get any tax benefit? Plz. quote reference if any.
    Thanking you with Regards,
    J N DUTTA

  9. Satish Pujar says:

    I am State Government employee as a salaried person was undergone medical treatment for Noise Treatment , in the financial year 2015-16 and spent Rs.1.01 Lacs, for which i had received reimbursement of Rs.0.99 lacs from state Governement during the Financial Year 2016-17. Whether this reimbursement is taxable or not please assist me?

  10. Prasad Natoo says:

    I am working in Bank of India. Bank has taken out medical insurance policy under IBA scheme . The third party DHS has paid my medical bill of Rs. 67000/- including operation charges. Whether it is taxable in my hands pl guide me.

  11. sameer says:

    Dear Sir/Mam, My Mother is a pensioner [was a govt employee]. She gets a medical reimbursement of RS 10500/- per year, only if she provides the medical bills to her office, if the bills are not provided than she does not get a single penny. For AY 2015 – 2016, she provided bills of Rs. 9000/- and she got a reimbursement of that amount in her pension account along with her pension. My query is, if she is supposed to fill ITR 1 form [please advice on this too whether itr 1 or any other form], than as per my knowledge this Rs 9000/- are non taxable .. than where to disclose this amount in the form ??
    Secondly, there is a mismatch of pension amount.. as per bank pass book records it shows Rs. 250000/- credited in the financial year 2014-2015 but form 16 given by her employer shows 200000/- as salary/pension paid.. when spoked to the employers accounts officer.. he says the form 16 given by him is right and maximum medical reimbursement amount i.e. is Rs 15000/- should be deducted from 200000/- and disclosed in the form under head salary..
    Please guide what to do in such situation. Waiting for your valuable reply. Regards

  12. Ranjit Singh says:

    Whether reimburse of medical claim on opd treatment from govt hospital is taxable, if no please send relevant rule or act

  13. M.G.Aswathanarayana says:

    hellow sir..
    I have received Rs. 27500 as medicle reimbursement for made expenditure Rs.50000.
    I am working in a state got job.
    my question is how much amount will be deucted as an exemotion from my salary aND how it calcalclat
    please reply
    with regards.
    M.G ASWATHANARAYANA

  14. Dilip T Dhokare says:

    Sir, I am Maharashtra state govt employee. I do not have any mediclaim policy. During 2016-17 I have spent amount for me, my wife and my father’s (88 yr old) treatment in private hospital. few of the medical bill I have reimbersed through govt. Now out of medical re imbersed what they have given to me, only Rs.15000 rebate and rest amount treated as taxable. my question in this regard is what is a rebate for re imburesement of medical bill. secondly any benefit for my 88 yrs treatment bill other than 15000 rebate.Out of these treatment two of the treatment were belong to last yr (Dec15) but amt recd during this yr. Since all exp I have to pay from salary about Rs.3.00 lakhs. out of few only re imbersed. thanks and regards.

  15. vikas says:

    dEAR SIR
    I HAVE MEDICAL POLICY OF ICICI INSURANCE CO, last year company reimbursement me more then 4 lac due to im Admit at hospital . But Time of Treatment i was pay i bills then ater i was claim to icici insurance company and behalf of my insurance policy icici insurance reimbursement my bills to my personal Ac ..Please guide me it TAX FREE or Taxable ,If taxable so whats d Limit ..i m so much confuse regarding all this bcoz amount is High .

  16. B. Saha says:

    An amount of rs.27450/- received as medical reimbursement from WB Health scheme 2008 (cost of hearing aid). So Rs.15000/- is free from I Tax and Rs.12500/- will be add as Income ? Please clarify.

  17. S K Prajapati says:

    Please advise if the medical reimbursement on treatment at tax exempted charitable Trust hospital are taxable?

  18. Nikhil Shah says:

    Amount received by employee from employer on account medical reimbursement, which is not taxable in hands of employee, then such amount is allowed as expenditure for employer or not.

  19. Praveen Saxena says:

    Is there a provision to carry forward the excess bill amount to next month for a monthly reimbursement paid scenario. Eg If I pay bills worth Rs1500 and get paid only 1250 on a monthly basis as reimbursement against bills, then excess Rs250 bills can be considered and paid next month with another set of Rs1000 bills to be paid as Rs1250 medical reimbursement next month. All counted as non taxable. Or I will still have to product bills worth Rs1250 next month to avail reimbursement under non taxable category with excess bills produced last month getting lapsed.

  20. Unnati Bellare says:

    In which section do we declare medical allowance / reimbursement in the income tax declaration form? Or is it only part of flexi pay ?

    How different is this from Section 80 DDB ?

    • Varma alluri says:

      Medical Allowance :It is an allowance that is provided for under section
      17(2) of the IT Act and states that an employee can submit bills to the
      employers for medical treatment undertaken by them of their family
      members.

      Section 80DDB : Deductions of expenses on medical treatment of specified ailments (such as AIDS, cancer and neurological diseases) can be claimed under Section 80DDB.

  21. alap shah says:

    Sir, My father undergo Total Knee Replacement surgery at Shalby Hospital, Ahmedabad. Total cost is Rs.3 Lakh. I am serving in State Government of Gujarat. Our company tie up with Shalby Hospital for treatment. The same will be reimburse by company. Can I get Income tax excemption from this reimbursement amount under 17(2) or any other rule of IT?? Further, Shalby is under aprroved hospital list of CGHS. please guide sir…

  22. Ramya says:

    Sir In November 2015 my mother received a sum of 1 lakh (after my father’s death(2012)) for my father’s medical expenses incurred during his hospitalization in the year 2012 from the health fund as my father was a Tamilnadu government employee retired in 2010. Kindly let me know whether that money she received from the health fund is taxable for my mother this financial year.

    • Srikant Agarwal says:

      If the Hospital is having exemption certificate from income tax department then this whole amount will be tax free

  23. Sarmukh says:

    I received medical reimbursement of Rs 98000 for a chronic disease is this amount taxable

  24. Milan Narkar says:

    My husband who is salaried employee of the Public sector Bank, has undergone medical treatment for Brain Tumor, in the current financial year 2015-16 and spent Rs.3.50 Lacs, for which he has received reimbursement of Rs.1.27 lacs from his employer. Whether this reimbursement is taxable?

    • raj says:

      Sir. Mere farher ka may 2015 me bypass operation ka 4 lakh medical kharcha kiya tha. Mai state government employ Hu medical rebersment bill muze sept. 2016 mai 3.5 lakh Mila. Yah kharcha mani government approved hospital me kiya tha . To Yeh paise ko tax lag sakta hai. Mere pitaji handycap hai. Plz suggest me.

  25. Tarsem Singh says:

    Sir, Please guided if an employer (say company) pay directly to a hospital ( a private hospital, not approved by Income Tax Deptt) the cost of treatment of its employee, and the sum is more than Rs 15000/- during a financial year under its cashless treatment policy, is this amount taxable in the hands of employee ? No insurance policy either by employee or employer. Please Note company has also deducting TDS of hospital on hospital bill and issuing Form 16 to hospital. If the employee is also held liable to pay tax, it is also responsibility of company to deduct tax from him, will not it be a case of double taxation ?

  26. Sekaran says:

    your article is totally silent on expenses of a senior citizen who does not have any income from employer and no insurance and all exp met from own resources.
    pl reply on that point immeditely. why can’t they show medical exp as allowed expenditure.

  27. K.Muralidharan says:

    “Taxability of medical reimbursement received & medical expenses paid”

    Where an employee takes OPD treatment from Govrt. hospital and the cost of medicines purchased and reimbursement to the employee is liable for taxation beyond the exemption limit of Rs.15000

  28. kARTHIKEYA says:

    Instead of Reduce Tax Evasions The Government of India It self Allows Certain deductions(chapter VIA) to the persons and help auxiliary Bodies such as Insurance Policies , Medical Policies and investments (limit)

  29. CA.S.K.AGARWALLA says:

    Tax Payers should be provided with medical benefit by way of points credited to their account based on tax payment which can be encashed against their medical expenses.

  30. SHIV KUMAR DAMANI says:

    Without any medical health insurance policy, a sum up to rupees five thousand is also allowed u/s 80D. (preventive health check up expenses). In this no insurance policy, no hospitalisation etc.

    Am I correct, sir.

  31. jai says:

    Irresepective of insurance policy taken or not government should give standard exemption to individuals propretitor & government should bring health policy for all its citzens as in usa so all citizens get health benifit

  32. annamalai nagappa says:

    Please also advise on the tax deductions available for senior citizens receiving pension but undergoing periodic preventive health check up

  33. B S Yadav says:

    nice

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