Medical Reimbursements and Taxes: Are There Limits and Rules You Should Know?

Medical allowances are tax-free up to 15000/- per annum, above which they become taxable. What about medical reimbursements given? Is there a limit for that as well? What are the general rules for reimbursing medical benefits?

Regards,
Joan

If you are following CTC (Cost to Company) basis, then there is nothing else to pay, thus rendering the need to calculate reimbursements useless.

Please note, to use the Medical allowance, you will have to submit actual bills for reimbursements. These reimbursements are subject to a maximum of Rs 15,000 for tax-saving purposes.

So, if you produce on-demand bills worth Rs 1000 only, then your Medical reimbursement will be for Rs 1000 only.

Hope this info helped you understand it better.

So, does it mean that medical allowances and medical reimbursements are one and the same, or, for that matter, similar?

The allowance could be Rs 15,000 if you claim the full amount (or more) by showing cash receipts of the same. In this case, the value of reimbursements is subject to a maximum of Rs 15,000 only, not more, but less if the value of bills shown is less. Allowance refers to the maximum limit, while reimbursements indicate what is claimed by showing proof via bills. I hope this clears up the concept. Feel free to ask more! 😉😈

Dear Joan,

Medical allowance is taxable. Under the income tax, any amount paid as an allowance is considered as a part of salary and hence becomes taxable, irrespective of whether it is ₹15,000.00 or less or more.

Medical reimbursement up to Rs. 15,000.00 per year made by an employer to an employee is exempted from payment of income tax. For this, the employee has to claim this reimbursement.

For claiming reimbursement of expenses, every employee is required to give an undertaking or submit bills to support the claim.

These expenses may be in the form of a doctor's consultation fee, purchase of medicines, or payment of fees/charges towards pathological tests. The expenses can be for oneself or other dependents of the family, including father, mother, or dependent brother or sister.

To claim reimbursement, the employee must keep the supporting documents with them, even if not asked for by the employer. The onus to prove is solely on the employee because they are availing tax benefits from the income tax authorities against these reimbursements.

Hence, reimbursement and allowance are not the same things. Reimbursement is a receipt for expenses already paid by an individual, while an allowance is an amount directly a part of the monthly salary.

Regards,

Anil Anand

Just wanted to check whether medical expenses on opticals, dentals, and ortho are allowed under medical reimbursement.

Vineet

Dear Vineet,

Expenses incurred by an employee for the purchase of spectacles to correct vision to an extent defeat the purpose of medical reimbursement. Yes, the charges paid to a doctor (ophthalmologist) for medically evaluating your present eye vision and advising the use of the correct power of lenses are reimbursable and also exempt from income tax.

Making reimbursement is at the discretion and depends on the policy of the management. Any company is free to reimburse any expenses. However, for claiming exemption from income tax, the expenses must meet the objective of the act.

Expenses incurred for availing ortho or dental services are fully reimbursable as per the company's policy and are also exempt from income tax up to the limit of Rs. 15,000.00 against medical procedures/treatment during the year.

Regards,
Anil Anand

So, is it a common practice for employers to pay their employees who don't use the company's health plan? It seems to me that all or part of what an employer would spend on insurance should be given to the employee. The employee shouldn't necessarily lose the benefit just because a spouse has better insurance or something like that.

Hi Anil,

I recently joined CiteHR and was reading the conversation regarding Medical Allowance and Medical Reimbursement. I have my concepts clear now about it. My company wants to introduce Medical Reimbursement as a part of the CTC. I need to prepare documentation to introduce it to the company. Could you help me out in case you have any write-up on the same?

Margaret :)

Dear All,

The major difference between medical allowance and medical reimbursement is as follows:

Medical Allowance:
1. It is part of the individual's salary.
2. It becomes non-taxable on the production of actual bills up to a maximum of Rs. 15,000.
3. If you are unable to produce actual bills, the company pays you medical allowance, but it becomes taxable.

Medical Reimbursement:
1. Available only on the production of actual bills.
2. The company is not liable to pay if the bills are not produced.

Sumit

Hi,

The only difference between MA and MR is that MA is taxable, and MR is tax-exempt for the bills given, and for the balance, it will be taxable. For example, MR for a month is 1250, and if an employee produces a bill for 1000 Rs towards May '06 Salary, he will be paid only 1000, and the balance of 250 will be carried forward to the next month. The next month, he can produce a bill for 1500 and receive the salary. If an employee doesn't provide any bill, he will not receive payment for that month.

Hope this clarification helps.

Regards,
J A Xavier
Human Resources

Hi all,

I am an MBA student specializing in HR. Your inputs were of great help to me. Now I can understand why my professor always takes medical allowance as 15,000 while explaining tax benefits. 😊

Regards,
Preeti

I agree with Anil Anand. However, some companies have a practice of giving unlimited medical reimbursement (supported by proofs), especially to senior employees. In this case, any amount beyond Rs.15,000/- is considered as an allowance and is fully taxable.

Alternatively, if one has been promised as a part of his/her CTC, Rs.15,000/- as Medical reimbursement and he/she is able to provide proofs for an amount less than Rs.15,000/-, then the balance unsupported amount is payable to the employee at the end of the financial year as a taxable component.

Hope this helps you.

Regards,

Sujata

Email: sujata.swamy@pidilite.com

Hi,

Is there any supporting rule, like income tax or some other, by which we can justify the medical reimbursement for doctor consultation?

Understanding Medical Allowances

1) What do Medical Allowances cover?

a) Like 15,000 INR Mediclaim bills, OR 15,000 INR medical store bills, OR without any medical store bills or Mediclaim bill, is 15,000 INR exempted?

b) If yes, do I have to show any one bill of 15,000 INR for it to become tax-free? Then my question is, if I don't fall under a tax bracket, do I still have to show the bills?

Medical Reimbursements

2) Does the company deduct 1,250 INR every month as Medical reimbursements and only reimburse you when you provide bills totaling 1,250*12?

3) What are Medical reimbursements? Do they come after medical allowance? For example, assuming that in Medical Allowances I have shown bills of 15,000 INR at a medical store and my 15,000 became tax-free. Now, if I show a bill of 15,000 INR again in medical reimbursements, will another 15,000 INR be exempted?

4) If I don't fall under a tax bracket, does the company deduct 1,250*12 INR from my account and refund me when I provide bills?

For the purpose of Medical Reimbursement (Rs. 15,000 per annum), I require information on which types of bills are exempt from tax. If anyone has created a list, would they kindly share it with us? Specifically, I would like to check for dental treatment bills for silver fillings and bills for the purchase of spectacles worth more than Rs. 2,000.

Thank you in advance.

Warm regards,
Deena Jagasia

Kindly clarify my query - I receive ₹1250 per month as a Medical Allowance with my salary. When I tried submitting my medical store bills to my company, they refused to accept them. I was told to claim the exemption at the time of uploading my return. How am I supposed to do the same...?

Hi,

Can anyone help me with the medical allowance amount for the Financial Year 2015-16? Is the medical allowance amount the same as health insurance, or are they different? I'm confused about this. If they are different, please let me know the respective amounts. Some people are saying it has increased from 15k to 25k per annum, while others claim it's still 15k.

Regards,
Chandru