Restructuring of Salary Components
There can be a restructuring of salary. With this, some components of the salary may be removed and others included. Since each revision is a new condition of service, there is nothing wrong with 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. 25,000 and Rs. 1,000 was the medical reimbursement, and if this is revised to Rs. 26,000 as a fixed salary per month, there is no direct loss to the employee. Therefore, this is not illegal.
However, for an employee whose income is subject to tax deduction, this will reduce their take-home salary because reimbursements are exempted from Income Tax subject to a certain amount, say Rs. 15,000 per annum for medical reimbursements. Therefore, if you have a larger portion of your salary as reimbursements, like medical reimbursements, fuel reimbursement, telephone reimbursement, etc., your TDS will be less.
Regards, Madhu.T.K