Madhu.T.K
Industrial Relations And Labour Laws
Vishal_dhruv
Hr In A Reputed Automobile Company

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Dear All, My query is related to medical allowance. Situation is as follow:
Employees getting Rs.15000 or less are covered under ESIC. Company does not have any tie up with medical insurance/group insurance company. Now what if medical allowance is mentioned in total gross of employee's salary, say Rs. 1250/-. What will be the impact on employer in case employee meets with an accident or falls sick and only medical allowance is given to him (Rs. 1250/-), not covered under any medical insurance policy?
In case ESIC is not applicable, is medical insurance mandatory in that condition? pl give your valuable comments on this. Waiting for your answers now.....

In respect of employees who are covered by ESI Schemes, you have no confusion, I believe. Now, in respect of those who are not under ESI, it is not mandatory that the employer should provide for any medical insurance and as you said it is okay if you pay a medical allowance of Rs 1250 every month along with salary. It is not compulsory that in case of sickness the employer should bear the expenses. However, in case of accident while on duty (I repeat, while on duty), the employer is liable to meet the expenses and even pay the compensation for partial disablement as is provided under the Workmen's Compensation Act. At the same time, if the employer had taken an insurance suitable to cover such accidents, naturally, the cost would have been less. In the case of accidents resulting in death also the employer has to bear the cost.

Medical allowance as a component of salary will not serve the above purpose for which separate accident/ death cum hospitalization policies should be preferred. The cost of it, ie, the premium should be paid by the company and not to be recovered from the employee. It is okay if you recover the premium paid in respect of any medi claim policy which is intended to cover hospitalisation expenses of the employees and their family.

Regards,

Madhu.T.K

Dear Madhu Sir,
Really fortunate to get response from a person like you. The way you reply is always precise and complete. Really my query has been answered properly. But further would like to know one thing more....
if medical allowance being given in gross salary, up to Rs. 1250/- pm which is tax exempted, will it be obligatory for the employee to provide medical bills at the time of tax return at end of financial year, to avail tax exemption? pl comment on this also

In order to get tax exemption the employee is required to produce bills which are spent for treatment and purchase of medicines in respect of himself, spouse and children and the dependent parents.
Regards,
Madhu.T.K

Hi,
Adding to the discussion. If an employee is covered under ESCI then his salary is less then Rs. 15000 p.m. and less then Rs. 1,80,000 per annum. Income tax for the current year is for taxable income above Rs. 2,00,000 p.a. So in the above case medical bill are not compulsory. If the taxable income is above Rs. 2,00,000 then medical bill would help in reducing tax liability.
Warm Rgds,
Vikas Goel

Mr. Vikas,
It will be very useful if you could further answer the following:
(i) in case company is going to provide medical policy to employees and premium is to to paid by company, will that be shown in CTC of the employee?
(ii) Can it be possible to deduct premium amount from employee's salary & some part from employer also and deposit the same in medical insurance policy. . . as the way it is done for an employee covered under ESIC?
Thanking you in anticipation

Hi,
My answer -
1. Frankly specking it should form part of the CTC.
2. As the answer to te above is positive the entire amount is shown as salary to employee and paid to the insurance co on his behalf. e.g.
Salary 10,00,000 p.a.
Medical Insurance 5,000 p.a.
CTC 10,05,000 p.a.
however. some co. dont even show medical insurance of the employee in CTC. Its a policy matter and does not have income tax angel to it in either case.
Warm Rgds,
Vikas Goel

Dear Sir/Mam,
If, I operate pan India with headquarter in a city, and in rest all places I have 2-3 employees per city.
Hence, I am not able to give them ESI (as ESI registration is possible if I have minimum 10 employees in that city). Will group insurance for medical and compensation cover up my statutory
liability.

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