How to Handle Medical Advances in Salary Slips for Maximum Tax Benefits?

Hi All,

I am in the process of creating a salary slip format and finalizing the components of the salary. I need your help to understand how to handle medicals. If I want to provide a maximum tax benefit of ₹15,000 per annum, can I display it as Medical advance in the salary slip? If the employee submits bills by the year-end, can it be converted to reimbursement? Or will Medical Advance become taxable if shown in the salary slip?

Please advise.

Thanks,
Ramandeep

Hi,

The medical allowance can be shown in the salary slip as Medical Allowance, and to the extent that bills are produced, the same can be deducted from the Gross Salary when issuing Form 16 at the year-end.

Please correct me if I am wrong.

Regards, Paddutr

Hi,

The medical allowance can be shown in the salary slip as Medical Allowance, and to the extent that bills are produced, the same can be deducted from the gross salary while issuing Form 16 at the year-end.

Please correct me if I am wrong.

Regards,
Paddutr

Hi Ramandeep,

You can do as you have proposed. Medical advance will not be taxable if shown in the payslip. If the bills are not submitted, then the advance becomes Medical Allowance, which is taxable. If bills are submitted, it becomes Medical reimbursement. However, a better practice would be to not wait until the end of the year, but to ask for bill submission every 2-3 months or even half-yearly.

Warm regards,
Devjit

Dear Ramandeep,

If you are showing Medical advance in the payslip, it would be taxable. It is better not to show it on the payslip and keep it as reimbursement, which is non-taxable.

Regards,
John