I need to provide the salary structure to my manager. I am skeptical about Medical Reimbursement. Please help me to understand if there is any law that states an employer has to include the Medical Allowance/Medical Reimbursement component in the salary structure, or if it can be opted out.
We are a small company with 20 employees. Due to insufficient knowledge, they do not have legitimate bills to support Medical Allowance, and now Rs15000 will be taxable.
My question is, can I remove the medical allowance component from the salary structure? Please help!
From India , Pune
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We are a small company with 20 employees. Due to insufficient knowledge, they do not have legitimate bills to support Medical Allowance, and now Rs15000 will be taxable.
My question is, can I remove the medical allowance component from the salary structure? Please help!
From India , Pune
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Hi, Medical Allowance is not a mandatory component. It is beneficial for tax saving. The medical receipts need to be submitted by the employee to claim the benefit. Vijaya
From India
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2From India
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Thanks Vijaya, Can you please let me know if there is any policy or online reference for the same.
From India , Pune
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From India , Pune
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Dear Sam,
Removing Medical Allowance and reimbursement shall be treated as a change in service condition; hence, notice thereof, at least 21 days before, is to be served to all the concerned employees under section 9A of the Industrial Disputes Act, 1948. No changes can be made without the employees' consent. However, medical allowance and medical reimbursement are two different components. Medical allowance is fully taxable in the hands of the employee, whereas medical reimbursement is exempt up to ₹15,000 under section 17(2) of the Income Tax Act, 1961. Since it is not a statutory component, you are not bound to include these components in the salary structure. Medical reimbursement predominantly aims to provide tax benefits to employees; only general medicines and accident expenses are allowable under medical reimbursement. The following expenditures are not permitted for medical reimbursement:
- Cosmetics and cosmetic surgery
- Ear piercing
- Electrolysis
- Exercise equipment or programs
- Fitness/weight loss programs and drugs
- Funeral expenses
- Hair removal
- Hair transplant
- Illegal operations and treatments
- Massage therapy to relieve stress or depression
- Maternity clothing
- Teeth whitening
- Non-prescribed drugs and medicines
Thanks and Regards,
V SHAKYA
HR and Labour Laws Advisor
From India, Agra
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Removing Medical Allowance and reimbursement shall be treated as a change in service condition; hence, notice thereof, at least 21 days before, is to be served to all the concerned employees under section 9A of the Industrial Disputes Act, 1948. No changes can be made without the employees' consent. However, medical allowance and medical reimbursement are two different components. Medical allowance is fully taxable in the hands of the employee, whereas medical reimbursement is exempt up to ₹15,000 under section 17(2) of the Income Tax Act, 1961. Since it is not a statutory component, you are not bound to include these components in the salary structure. Medical reimbursement predominantly aims to provide tax benefits to employees; only general medicines and accident expenses are allowable under medical reimbursement. The following expenditures are not permitted for medical reimbursement:
- Cosmetics and cosmetic surgery
- Ear piercing
- Electrolysis
- Exercise equipment or programs
- Fitness/weight loss programs and drugs
- Funeral expenses
- Hair removal
- Hair transplant
- Illegal operations and treatments
- Massage therapy to relieve stress or depression
- Maternity clothing
- Teeth whitening
- Non-prescribed drugs and medicines
Thanks and Regards,
V SHAKYA
HR and Labour Laws Advisor
From India, Agra
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Dear Seniors,
In case of the closure of a factory with 6 employees:
1. Should we obtain any permission from the Labour Office?
2. What will be the notice period?
3. What compensation is due if employees worked for only 3 years?
4. Is the calculation of compensation based on basic salary or gross salary?
Employee details:
- Basic: 9000/-
- HRA: 4000/-
- Conveyance Allowance: 3000/-
Kindly provide guidance on the above queries. Thank you.
From India, Hyderabad
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In case of the closure of a factory with 6 employees:
1. Should we obtain any permission from the Labour Office?
2. What will be the notice period?
3. What compensation is due if employees worked for only 3 years?
4. Is the calculation of compensation based on basic salary or gross salary?
Employee details:
- Basic: 9000/-
- HRA: 4000/-
- Conveyance Allowance: 3000/-
Kindly provide guidance on the above queries. Thank you.
From India, Hyderabad
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For closing down a factory in which only six persons were employed, no permission is required from the Labour Officer. However, you have to give one month's notice of your intention to close down the unit. Similarly, they should be given retrenchment compensation at the rate of 15 days' wages for every completed year of service. Salary for this purpose means the gross salary because a bifurcation like this, with around 45% as HRA and more than 30% as conveyance, should only indicate that this is only an arrangement for the benefit of the employer and has nothing to do with the contract of employment where for the workers what he gets monthly is the wages. Therefore, the approximate amount of compensation would be Rs. 16000/30*15*3 or Rs. 24,000 per worker.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Dear Sam,
You are inquiring about the salary structure. You can also design it. For example - Basic salary/ HRA/ Conv. reimbursement/ Med. allowance/ LTA, etc. There should be components that, under Income Tax, can be allowed and are beneficial to employees. This should be a point to consider when finalizing the structure. Expenses on medical treatment, if reimbursed, can go tax-free, allowing one to save from income tax, provided it has been reimbursed subject to Rs. 15,000/year if bills are produced. The company can pay even if bills are not produced, but the amount paid without supporting bills will be taxable. Similar treatment is to be given for LTA and HRA. You can prepare this and have the proposed structure vetted by your finance head, who must be dealing with company taxation.
Regards,
RDS Yadav
From India, Delhi
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You are inquiring about the salary structure. You can also design it. For example - Basic salary/ HRA/ Conv. reimbursement/ Med. allowance/ LTA, etc. There should be components that, under Income Tax, can be allowed and are beneficial to employees. This should be a point to consider when finalizing the structure. Expenses on medical treatment, if reimbursed, can go tax-free, allowing one to save from income tax, provided it has been reimbursed subject to Rs. 15,000/year if bills are produced. The company can pay even if bills are not produced, but the amount paid without supporting bills will be taxable. Similar treatment is to be given for LTA and HRA. You can prepare this and have the proposed structure vetted by your finance head, who must be dealing with company taxation.
Regards,
RDS Yadav
From India, Delhi
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