Salary Related - Medical Allowance - CiteHR
Legal Analyst, Hrm
V. Balaji
Ir & Hr
Asst. General Manager - Hr
+3 Others

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Dear Hr's
Kindly let me know should HRA and medical allowances change if leaves are without pay in salary or only basic pay should change? .
Awaiting replies.
Thanks a ton in advance .

As per Company Law is there any upper limit on the Gratuity payment to Employees of a Public Limited Companis?
I am aware there was an upper limit of Rs 3.5 lakhs for TAX FREE gratuity which has now been enhanced to Rs 10 lakhs.
But is this the upper limit of Gratuity?
For example if Gratuty works out to say Rs 20 lakhs, then will it restricted to Rs 10 lakhs or will it mean that Rs 10 lacks of gratuty will be income tax free and the balance Rs 10 lakh will be taxable.
Kindly enlighten me.

Employees covered under the gratuity law are now eligible to receive gratuity of up to Rs 10 lakh, as against an earlier specified statutory limit of Rs 3.5 lakh.
The limit is only upto 10.00 L.

Dear Thatte, It is upto the employer to pay excess Gratuity over and above 10 Lakhs. As rightly pointed out by you only 10 Lakhs will be exempted and the rest will be taxable. Regards M.V.KANNAN
Hi Kannan, I think for govt employees the limit is only 10.00 L. For Pvt sector, no limit but out of which 10.00 L is tax exempted. Correct me if I am wrong. Regards R.Ponraj

there needs a clarity in your question. I think you are asking when a person goes on leave on Loss of pay, do we need to deduct salary only in basic or in other allowances also like HRA, Medical, right?

whenever salary structure is designed, an employer splits the same into different component like Basic, DA, HRA, conveyance, special allowance, etc. accordingly to the style he adopts. Whatever nomenclature you call, all are part of salary, do you agree? Therefore when he goes on loss of pay, the whole salary needs to be taken into account.

Secondly, if you adopt to deduct only the basic salary and paying HRA other components full, there may be chances that a sort of complacency in the minds of employees that he loses salary only in Basic; so he may not take it seriously after all only a small amount he he loses. This might lead to more absenteeism.

As far as medical goes, some company pay it as "Allowance" and others pay as "reimbursement". As long as you pay as monthly ALLOWANCES, it form part of salary and deserves to be deducted when he goes on loss of pay.

Whereas when you treat it as reimbursement, he can also submit medical bills for the expensues incurred for his dependents. Hence irrespective of his LOSS OF PAY, etc. you need to pay him as per his eligibility. Income Tax Act also permits medical reimbursement to the tune of Rs.15,000/- p.a. as exempted. (remember, it must be on production of bills)

Hope it makes sense.


Dear Balaji,
You may like to review your reply, as there seems to be some contradiction in that.

For example, facility of medical allowance is granted to the employee to compensate the expenses incurred by him/her on his own treatment or that of his family members. Your contention is that in the case of leave with loss of pay, he/she would lose medical allowance also. Suppose the employee fell ill and is under treatment for long and for that reason only he/she is compelled to remain on leave without pay there being no other kind of leave at his/her credit, would the management be right to deny medical facility to its employee, if the company does not have the policy of medical reimbursement?

Similarly, if in the same case of his/her long illness and leave without pay, as above, would he/she lose the benefit of HRA also, when he is incurring expenditure on rent for his/her accommodation?

You, as well as other seniors, need to think very seriously on these points before making any final opinion.

In my views, until the HRA and Medical Allowance are calculated and expressed specifically in terms of certain fixed percentage of the basic salary, the management would not enjoy the right to deny these facilities to the employee, more particularly for his medical treatment.

So, I am of the opinion, if medical and HRA are treated as allowances and allowed as some fixed amount
(not in terms of percentage to the basic salary), it does not have any relation with the basic salary and cannot get any effect by the kind of leave or the amount of salary in lieu thereof to the employee. However, for HRA purposes, the employer is free to stipulate some condition for allowing that for certain fixed duration of leave of any kind, i.e., 4 months or 6 months, etc. But that specific provision has to be made part of the Employee Manual/ Leave Rules of the company, besides the agreement with or appointment letter of the employee.

So, until the company formally makes such provisions, HR would be quite wrong to deny these benefits to the employee merely on presumption basis. Any litigation-happy employee can get these benefits through court of law, in the absence of such provisions in the rules of the company.

So, you may like to review your opinion on the issue.

PS Dhingra
CEO cum Management & Vigilance Consultant
Dhingra Group of Consultants
New Delhi

Dear Anuja,
You may like to review your question by checking the position in view of my opinion expressed above, whether the medical and HRA are allowed as fixed allowances or as a certain percentage to the basic salary?
I have already expressed my views that if medical and HRA are distinct allowances and are not percentage oriented to basic salary, these can be allowed even during leave without pay. However, if these are allowed on percentage basis of the basic salary, these cannot be allowed, if no salary becomes due to the employee.
PS Dhingra
CEO cum Management & Vigilance Consultant
Dhingra Group of Consultants
New Delhi

Dear Anuja,
Replying to your query, I would like to tell you that your HRA, and medical allowance will certainly change along with basic pay if the leave is without pay this is because everything is calculated on basic wages and the number of work done in a month. Henceforth as the number of working days is reduced due to leave the basic will change which results into change in other pays also and finally the Net pay will change. I hope you will be satisfied with the answer..

Mr. Dhingra,

Normally, the salary has various components and these HRA and Medical also paid by some companies as part of monthly salary; By this system, as far as medical goes, he/she are not required to produce any bills and salary is computed as per the no.of days he clocks in the month.

Even LTA in some company paid monthly. In some companies, they form a rule saying that they need to go on leave for certain no.of days; when they are back they need to produce air/train tickets, other expenses incurred, to claim LTA. As per IT Act, they follow block period, etc. to get exempted from IT, etc.

Similarly, in some companies, the medical allowance is paid only on production of medical bills, which is what I said, it is something reimbursement and comes to him as one of the perks.

Hence, what am trying to say is that when there is no production of bills required for Medical or LTA and paid as part of salary every month, when an employee goes on loss of pay, there is nothing wrong in deducting those components also. By doing do, the employer will not be branded doing something unethical / illegal.

Coming back to HRA, irrespective of whether an employer pays it as certain percentage basis, or a fixed sum, it also forms part of salary. It is employer's discretion and their company policy, whether they allow it in full even if they go on loss of pay, or deduct proportionately according to the no.of days he goes on loss of pay. I do not think anything wrong again in deducting HRA also when he goes on loss of pay.

I expect other HR managers working in other companies throw light on this.


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