Dear Friends
Can you please advise the difference between these two components of Salary - Medical Allowance & Medical Reimbursement, and how tax exemption can be claimed under each of these?
Can't employees claim for tax exemption to the extent of medical bills submitted if they are getting a fixed Medical Allowance every month?
Thanks & Regards
Lakshmi
From India, Bangalore
1Can you please advise the difference between these two components of Salary - Medical Allowance & Medical Reimbursement, and how tax exemption can be claimed under each of these?
Can't employees claim for tax exemption to the extent of medical bills submitted if they are getting a fixed Medical Allowance every month?
Thanks & Regards
Lakshmi
From India, Bangalore
Medical allowance is a fixed allowance paid every month to the employees irrespective of the fact whether they submit the supporting bills or not.
Medical reimbursement is a payment made to an employee against the medical bills produced by him/her subject to his/her entitlement.
The maximum tax benefit available is Rs.15000 per annum.
To help your employees claim tax benefit, kindly advise them to submit bills for the amount of allowance received every month so that there is no problem. Further, you should rename the allownace being paid from "medical allowance" to "medical reimbursement".
Hope this would help you.
Thanks & Regards,
Avika Kapoor
Manager - Business Development
Kapgrow Corporate Advisory Services Pvt. Ltd.
E-173, Kalkaji, New Delhi - 110019
011-40553774
09310270884
From India, New Delhi
Medical reimbursement is a payment made to an employee against the medical bills produced by him/her subject to his/her entitlement.
The maximum tax benefit available is Rs.15000 per annum.
To help your employees claim tax benefit, kindly advise them to submit bills for the amount of allowance received every month so that there is no problem. Further, you should rename the allownace being paid from "medical allowance" to "medical reimbursement".
Hope this would help you.
Thanks & Regards,
Avika Kapoor
Manager - Business Development
Kapgrow Corporate Advisory Services Pvt. Ltd.
E-173, Kalkaji, New Delhi - 110019
011-40553774
09310270884
From India, New Delhi
Frieinds, thanks for the clarification. Just have some more queries though.
I understand that Medical Allowance is taxable and medical reimbursement is not taxable to the extent of bills submitted. Is it legal to pay it as medical allowance and not deduct any tax by collecting the medical bills? Is it ok if we are paying a fixed amount and it doesn’t tally with the bills submitted for that month? Also you have stated that we can rename the allowance paid from Medical Allowance to Medical Reimbursement. Can you pls let me know how we can do this? Is it done at the end of the year. Will the auditors accept this kind of a process? What should we state in the monthly Payslips – Medical Allowance or Medical Reimbursement?
Many thanks
Lakshmi
From India, Bangalore
I understand that Medical Allowance is taxable and medical reimbursement is not taxable to the extent of bills submitted. Is it legal to pay it as medical allowance and not deduct any tax by collecting the medical bills? Is it ok if we are paying a fixed amount and it doesn’t tally with the bills submitted for that month? Also you have stated that we can rename the allowance paid from Medical Allowance to Medical Reimbursement. Can you pls let me know how we can do this? Is it done at the end of the year. Will the auditors accept this kind of a process? What should we state in the monthly Payslips – Medical Allowance or Medical Reimbursement?
Many thanks
Lakshmi
From India, Bangalore
Avika,
I am nilesh,working in an MNC... my problem is that our company tell us to declear our investments & Medical bills but that time i havenot declear any thing.now i found that i got 5000 less of my salary can explain me what will be the reason.
Thanks
Nilesh
From India
I am nilesh,working in an MNC... my problem is that our company tell us to declear our investments & Medical bills but that time i havenot declear any thing.now i found that i got 5000 less of my salary can explain me what will be the reason.
Thanks
Nilesh
From India
If you have not declared your investments that are eligible for tax deduction and the amount of medical bills you would be submitting, the employer must have dedcuted tax at source from your salary.
You should talk to your HR/accounts department, whoever is processing the salary as to why they hav ededucted the amount and then you should provide them the details of investments {Life insurance policies, Housing loan repayment (principal and interest), PPF, PF, GSLI, NSC, Tax saving FD, Pension Policy, Mediclaim Policy, Education Loan, ULIP,etc} along with the amount of medical bills.
If they have deducted on some other account, please provide the details so that I can help you.
Thanks & Regards,
Avika
From India, New Delhi
You should talk to your HR/accounts department, whoever is processing the salary as to why they hav ededucted the amount and then you should provide them the details of investments {Life insurance policies, Housing loan repayment (principal and interest), PPF, PF, GSLI, NSC, Tax saving FD, Pension Policy, Mediclaim Policy, Education Loan, ULIP,etc} along with the amount of medical bills.
If they have deducted on some other account, please provide the details so that I can help you.
Thanks & Regards,
Avika
From India, New Delhi
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From India, Bangalore
From India, Bangalore
Some information to queries by Lakshmi:
1. Reimbursements are payments for bills/supporting documents whereas allowances are payments irrespective of bills made as fixed amounts month on month. Indian Tax system provides exemption for certain allowances as not taxable like conveyance allowance, children education allowance, uniform allowance etc under section 10(14). In case of any other allowance it is taxable. In case of medical reimbursements made to employees it is not taxable upto Rs.15000/- per tax year.
In effect an employer can even reimburse more than Rs.15000/- per tax year to an employee against medical bills but the amount which exceeds Rs.15,000/- would be taxable in the hands of the employee.
2. If a fixed amount i.e. allowance is paid and bills submitted against the amount does not aggregate to the allowance amount (considering it to be within the Rs.15,000/- limit) then the difference amount has to be taxed in the hands of the employee.
3.Tax deduction by employer for the salary income of employee is normally completed in the March month (end month of tax year). So if it is possible to deduct tax in the last month for the remaining part of medical reimbursement (for which bills were not produced) then the practice of asking for bills in before the last month would be fine to follow.
Better Practices:
Option 1: Maintain medical reimbursement away from pay slip as a facility. An employee would be eligible to claim for medical reimbursement upto Rs.15,000/-in a tax year. If the employee submits bills then a reimbursement would be provided to him. In case there is no bills provided no amount would be given to him.
Option 2: Provide a pay component called Medical reimbursements and obtain the bills from employees and pay the amount against the bills as non taxable (upto maximum of Rs.15,000/- per tax year) and the remaining amount as taxable.
Consequences of non non compliance to the employer:
In case the employer is not deducting taxes properly considering the amount (for which no bills have been provided) for taxing employees then there could be TDS related penalties.
From India, Madras
1. Reimbursements are payments for bills/supporting documents whereas allowances are payments irrespective of bills made as fixed amounts month on month. Indian Tax system provides exemption for certain allowances as not taxable like conveyance allowance, children education allowance, uniform allowance etc under section 10(14). In case of any other allowance it is taxable. In case of medical reimbursements made to employees it is not taxable upto Rs.15000/- per tax year.
In effect an employer can even reimburse more than Rs.15000/- per tax year to an employee against medical bills but the amount which exceeds Rs.15,000/- would be taxable in the hands of the employee.
2. If a fixed amount i.e. allowance is paid and bills submitted against the amount does not aggregate to the allowance amount (considering it to be within the Rs.15,000/- limit) then the difference amount has to be taxed in the hands of the employee.
3.Tax deduction by employer for the salary income of employee is normally completed in the March month (end month of tax year). So if it is possible to deduct tax in the last month for the remaining part of medical reimbursement (for which bills were not produced) then the practice of asking for bills in before the last month would be fine to follow.
Better Practices:
Option 1: Maintain medical reimbursement away from pay slip as a facility. An employee would be eligible to claim for medical reimbursement upto Rs.15,000/-in a tax year. If the employee submits bills then a reimbursement would be provided to him. In case there is no bills provided no amount would be given to him.
Option 2: Provide a pay component called Medical reimbursements and obtain the bills from employees and pay the amount against the bills as non taxable (upto maximum of Rs.15,000/- per tax year) and the remaining amount as taxable.
Consequences of non non compliance to the employer:
In case the employer is not deducting taxes properly considering the amount (for which no bills have been provided) for taxing employees then there could be TDS related penalties.
From India, Madras
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