Understanding Medical Allowance vs. Mediclaim: What's the Real Difference for Employees?

Hi,

I would like to know the difference between medical allowance and mediclaim given to employees.

Dear Vera,

"Mediclaim" is a term that usually refers to an insurance policy that provides medical coverage to the member. It commonly has two systems:

1) Reimbursement of medical and hospital expenditure up to the specified limits for all covered.

2) Cashless policy whereby you have to produce your medical insurance cards to avail benefits.

The Mediclaim is not taxable on the hand of the employee.

Medical Allowance is a type of allowance that forms a part of the salary and is paid at fixed intervals of time (as decided) and has no connection with the expenses incurred on medical. This is usually taxable, and tax relief is provided in case the employee files relevant documentary proof of medical expenditure.

The suitable policy followed nowadays is reimbursement of medical expenditure. The employee is usually paid against medical expenditure incurred, and this amount becomes non-taxable. If the employee wants, he can simply ask and take the money without incurring any medical expenses, but this amount becomes taxable.

Regards,

SC

Hi,

As rightly described by Swastik, mediclaim refers to an insurance policy under which all the employees are covered. The premium for this policy is paid by the company on behalf of the employees, and there are companies which show premium paid to the third party as a part of CTC.

In mediclaim, dependents of the employee are also covered as per the conditions of such policy. Cashless facility is available, and some companies provide PHS cards (Insurance cards) for the employees and their dependents.

Medical allowance is a benefit given by the company and is a part of CTC. Amounts up to 15,000 are non-taxable if you produce the bills; any amount over and above 15,000 is taxable.

This benefit is provided because most mediclaim policies do not cover sickness or injuries where the employee did not stay for 24 hours in the hospital.

I hope the difference is clear to you.

Cheers,
Archna

Can an employee provide both medical reimbursement (annual) and medical allowance (as a monthly component)?