There can be re structuring of salary. With this some components of salary may be removed and some other included. Since each revision is a new condition of service, there is nothing wrong in removing medical reimbursement as a component of salary provided there is no loss of income to the employee. For instance, if the salary was Rs 25000 and Rs 1000 was the medical reimbursement and if this is revised as Rs 26000 as fixed salary per month, there is no direct loss to the employee. Therefore, this is not illegal.
However, for an employee whose income is subjected to tax deduction, this will reduce his take home salary, because reimbursement are exempted from Income Tax subject to a certain amount, say, Rs 15000 per annum for medical reimbursements. Therefore, if you have more portion of your salary as reimbursements, like medical reimbursements, fue reimbursement, telephone reimbursement etc, your TDS will be less.
Madhu.T.K