Madhu.T.K
Industrial Relations And Labour Laws
Rdsyadav
Educator, Management Consultant & Trainer
+3 Others

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I need to provide the salary structure to my manager. I am sceptical about Medical Reimbursement. Please help me to understand is there any law present that says Employer has to put Medical Allowance/Medical Reimbursement component in salary structure or it can be opted out.
We are a small company with 20 employees. And due to insufficient knowledge, they do not have the legitimate bills to support Medical Allowance and now Rs15000 will be taxable.
My question is, can I remove medical allowance component from salary structure?
Please help!

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
Thanks Vijaya, Can you please let me know if there is any policy or online reference for the same.
Dear Sam,

removing Medical Allowance & reimbursement shall be treated as changed in service condition hence notice thereof atleast 21 days before is to be serve to all the concerns employees u/s 9A of ID act. 1948 and No changes can be made unless having employees's concent. however medical allowance and medical reimbursement is two different component while medical allowance is fully taxable in the hand of employee whereas medical reimbursement is exempt upto 15000 u/s 17(2) of income tax act. 1961. since it is not statutory component therefore you are not bound to put these component in salary structure. a medical reimbursement predominantly aims to provide the tax benefit to employees only general medicines and accident expenses are allowable under medical reimbursement. the following expenditure is not permitted to grant the medical reimbursement

:- cosmetics & cosmetic surgery.

:- Ear piercing.

:- electrolysis.

:- exercise equipment or programs.

:- fitness/weight Loose programs and Drugs.

:- Funeral expenses.

:- Hair removal.

:- Hair Transplant.

:- illegal operations and treatments.

:- massage therapy to relieve the stress or depression.

:- Maternity cloth.

:- Teeth whitening.

:- Non prescribed Drugs and Medicines?

Thanks & Regards

V SHAKYA

HR & Labour Laws Advisor

Dear Seniors In case of a closure of a Factory having 6 employees.
1. whether we should take any permission from Labour office.
2. what will be the notice period
3. what will be the compensation if employees worked for 3 years only.
4. Their Basic=9000/- HRA=4000/-Conv All =3000//-
and calculation of Compensation would be on basic or gross?
Kindly guide

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 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 speak 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 16000/ 30*15*3 or Rs 24000 per worker.
Madhu.T.K

Dear Sam,
You are asking salary structure . You can also devise this, For example- Basic salary/ HRA/ Conv. reiumbursement/ Med.allowance/ LTA etc.There should be some components which under Income Tax can be allowed and are beneficial to employees and that should be a point for considering while finalizing structure. Expenses on medical treatment if reimbursement can go tax free and one can save from income tax provided it has been reimbursed subject to Rs.15000/ year if bills are produced. Company can pay even if bills are not produced , but the amount paid without bills in support will be taxable. Similarl treatment is to be given for LTA and HRA .You can prepare this and get proposed structure vetted by your finance head, who must be dealing with company taxation.
Regds,
RDS Yadav

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