Are Medical and Uniform Allowances Taxable for Employers Under Fringe Benefit Tax? Seeking Guidance on Salary Exemptions

Hi Seniors,

Is Medical Allowance & Uniform Allowance included in reimbursement and taxable for the employer under the Fringe Benefit Tax (FBT)? Please guide me on the salary components under which an employee can receive exemptions.

Currently, we offer HRA, Uniform Allowance, Conveyance, LTA, and Special Allowances in our structure. However, I am considering revising the structure as employees are facing a heavy tax burden. Please help.

Regards,
Shikha Jain

Hi Shikha,

In my view, Medical Allowance and Uniform Allowance reimbursement should not come under FBT because it's a part of salary, not a benefit that the company is providing apart from salary to its employees.

As far as your salary structure is concerned, I believe you have chosen the right salary components in your present structure. If any kind of incentive could be included, this will reduce the tax burden.

Regards,
Dhanesh

Hi Dhanesh,

Thanks for your immediate response. I was going through the definition of FBT on the net as per the below-given link: [What is fringe benefit tax?](http://www.rediff.com/money/2005/mar/22spec.htm) I found that any kind of fixed component paid under salary is taxable. Also, as per my knowledge, incentives are also taxable. If you have any links related to this, please forward them.

Regards,

Shikha Jain

Hello Sikha,

If the medical allowance is labeled as "Medical reimbursement," it should not be taxable. However, if an employee receives it as a "Medical Allowance," it is taxable.

Hi Shikha,

Medical allowance, as part of CTC, is non-taxable to the employee up to INR 15,000 per annum on submission of bills. If the employee does not submit bills, it can be paid after tax.

Hi Shikha,

Medical reimbursement is non-taxable subject to submission of bills (max Rs. 15,000/- per annum). This can be a part of CTC. You can pay in advance with monthly pay (but will have to mention in the offer/appointment letter). Bills need to be submitted by the end of the year; non-submission of bills will attract a deduction of income tax.

Regards,
Pooja

Hi all,

As far as I know, FBT is basically for only some particular grades of employees. I mean it's the grade of employees whose CTC is more than a limit which is fixed by the company according to its policies. I think it includes things like car charges or taxi charges, driver salary, etc. Please do add if you have any inputs...

Thanks in advance 😊
Regards,
Yousuf

Hi,

FBT is charged on employers. If a car, petrol amount, driver salary, and car maintenance are part of the cost to company (CTC) and the car is used to perform official duties, while petrol, driver salary, and car maintenance bills are reimbursed by the employer, FBT will be charged on the employer. During a recession, the employer can recover FBT from employees.

Medical bill reimbursement is non-taxable subject to submission of a bill, max Rs. 15,000/- per annum. However, when it comes to the salary sheet, it is also taxable.

Thanks,
Subroto

Hi Payal,

Any amount paid to employees on a monthly basis is treated as an allowance and is taxable. Even if the employee submits the bills for medical allowance at the end of the year, it is treated as taxable. The simple reason is that reimbursement is an amount which the employee spent and then claimed, whereas in this case, a fixed amount is paid every month to employees.

"Hi Shikha,

Medical reimbursement is non-taxable subject to the submission of bills (maximum Rs. 15,000/- per annum). This can be a part of CTC. You can pay in advance with monthly pay (but will have to mention in the offer/appointment letter). Bills need to be submitted by the end of the year; non-submission of bills will attract a deduction of income tax.

Regards,
Pooja"

Hi All,

Thanks for your valuable input, but it's still not clear as some are replying in the positive and some in the negative. If someone has any authority or a copy of the act that states whether it is applicable or not, please forward.

Shikha

FBT charged to the employer, but the same can be recovered from the employee as other allowance or recovered under reimbursement.