Is It Fair for Employers to Carry Forward Unclaimed Medical Reimbursements? Let's Discuss

Our employer carries forward two components of CTC to the next year:

1. Medical Reimbursement
2. LTA

This is done due to the lack of bills from employees. If no bills or insufficient bills are submitted by the employee, the balance to the credit of the employee at the year-end is not paid but is carried forward to the next year. In the following year, the employee must submit such bills to claim any cumulative balance standing to their credit. In the absence of bills, these amounts accumulate in the name of the employee year on year and are paid when the employee leaves the job.

The employer argues that the same cannot be credited to the employee at every financial year-end as the employee has not submitted the bills.

My Queries

1. Is it right to carry forward such amounts to the next year?
2. Why can't an employee receive the sum due to them at year-end after deducting requisite taxes?

Please clarify with supporting references (Income tax circulars/case laws, etc.).

Your employer is correct. You need to close the books of accounts every year. I understand your genuine act of goodness in giving benefits to employees. However, you also need to understand the tax system in India. I am sure a tax consultant and a CA will help you understand the taxing system in India, which can be quite burdensome for us.

Regards,
Ukmitra

Unavailed Medical Allowance and Tax Implications

Unavailed medical allowance cannot be carried forward and paid as taxable if one fails to produce the bills. The limit for tax exemption is ₹15,000 per annum.

Regards,
Pon