Medical Allowances [Thread 565852] - CiteHR
Saswatabanerjee
Partner - Risk Management

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Dear Team,
I hereby looking anyone to suggest for me. As per govt.rule we can provide Rs.1250 as med.allowances, instead of Rs.1250 whether we can change to any maximum like Rs.1500 ? and will it come for medi.reimbursement.

Dear As per government norms maximum medical allowance is Rs. 15000/- Per annum, hence monthly is Rs. 1250/-. If you are giving above Rs. 1250/- then it will come under Tax.
Are you looking at reimbursing medical expenses of employees ? Or are you looking at structuring total salary and putting a part of the salary as a medical allowance ?
Dear Saswata,
Thanks for your information. Actually We bringing this Medi allowance into the salary breakups from the june month only, thats why checking out instead of 1250 to compensate last two months can give the breakup 1500.
If i go ahead with 1500, then i can equalise it for 15000/- otherwise i have to get collect the medi bills from employee only for 12500/-

There are basically 2 options.
A. Reimbursement - this is tax free for employee as its not income. It's tax deductible from employer as it is a valid and allowed business expense. There is no limit, can even be a lakh per year and no objection will be raised. But you need a valid bill from the employee for the reimbursement, of proper value. You can set a reimbursement limit, meaning that the invoices submitted are higher but you will give only so much per year. And that means a system of keeping track.
B. Medical allowance - this can't exceed the limit specified by the government under the income tax law. It's not that it can't exceed. It's just that if it exceeds, the employee will be liable to income tax on it, if he exceeds the total earning levels specified under the tax slabs
You can do a combination of both, saying x amount allowance, but y amount per year as reimbursement. Again more complication from control point of view

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