I need to provide the salary structure to my manager. I am skeptical about Medical Reimbursement. Please help me to understand if there is any law that states an employer has to include the Medical Allowance/Medical Reimbursement component in the salary structure, or if it can be opted out.
We are a small company with 20 employees. Due to insufficient knowledge, they do not have legitimate bills to support Medical Allowance, and now Rs15000 will be taxable.
My question is, can I remove the medical allowance component from the salary structure? Please help!
From India , Pune
Acknowledge(0)
Amend(0)
We are a small company with 20 employees. Due to insufficient knowledge, they do not have legitimate bills to support Medical Allowance, and now Rs15000 will be taxable.
My question is, can I remove the medical allowance component from the salary structure? Please help!
From India , Pune
Acknowledge(0)Amend(0)
Hi, Medical Allowance is not a mandatory component. It is beneficial for tax saving. The medical receipts need to be submitted by the employee to claim the benefit. Vijaya
From India
Acknowledge(1)Amend(0)
2From India
Acknowledge(1)Amend(0)
Thanks Vijaya, Can you please let me know if there is any policy or online reference for the same.
From India , Pune
Acknowledge(0)Amend(0)
From India , Pune
Acknowledge(0)Amend(0)
Understanding Medical Allowance and Reimbursement
Removing Medical Allowance and reimbursement shall be treated as a change in service conditions; hence, notice thereof, at least 21 days before, is to be served to all the concerned employees under Section 9A of the Industrial Disputes Act, 1948. No changes can be made without the employees' consent.
However, medical allowance and medical reimbursement are two different components. Medical allowance is fully taxable in the hands of the employee, whereas medical reimbursement is exempt up to ₹15,000 under Section 17(2) of the Income Tax Act, 1961. Since it is not a statutory component, you are not bound to include these components in the salary structure. Medical reimbursement predominantly aims to provide tax benefits to employees; only general medicines and accident expenses are allowable under medical reimbursement.
The following expenditures are not permitted for medical reimbursement:
- Cosmetics and cosmetic surgery
- Ear piercing
- Electrolysis
- Exercise equipment or programs
- Fitness/weight loss programs and drugs
- Funeral expenses
- Hair removal
- Hair transplant
- Illegal operations and treatments
- Massage therapy to relieve stress or depression
- Maternity clothing
- Teeth whitening
- Non-prescribed drugs and medicines
Thanks and Regards,
V SHAKYA
HR and Labour Laws Advisor
From India, Agra
Acknowledge(3)Amend(0)
Removing Medical Allowance and reimbursement shall be treated as a change in service conditions; hence, notice thereof, at least 21 days before, is to be served to all the concerned employees under Section 9A of the Industrial Disputes Act, 1948. No changes can be made without the employees' consent.
However, medical allowance and medical reimbursement are two different components. Medical allowance is fully taxable in the hands of the employee, whereas medical reimbursement is exempt up to ₹15,000 under Section 17(2) of the Income Tax Act, 1961. Since it is not a statutory component, you are not bound to include these components in the salary structure. Medical reimbursement predominantly aims to provide tax benefits to employees; only general medicines and accident expenses are allowable under medical reimbursement.
The following expenditures are not permitted for medical reimbursement:
- Cosmetics and cosmetic surgery
- Ear piercing
- Electrolysis
- Exercise equipment or programs
- Fitness/weight loss programs and drugs
- Funeral expenses
- Hair removal
- Hair transplant
- Illegal operations and treatments
- Massage therapy to relieve stress or depression
- Maternity clothing
- Teeth whitening
- Non-prescribed drugs and medicines
Thanks and Regards,
V SHAKYA
HR and Labour Laws Advisor
From India, Agra
Acknowledge(3)Amend(0)
Designing a Salary Structure
You are inquiring about the salary structure. You can also design it. For example, include components like Basic Salary, HRA, Conveyance Reimbursement, Medical Allowance, and LTA. There should be components that, under Income Tax, can be allowed and are beneficial to employees. This should be a point to consider when finalizing the structure.
Expenses on medical treatment, if reimbursed, can go tax-free, allowing one to save from income tax, provided it has been reimbursed subject to Rs. 15,000/year if bills are produced. The company can pay even if bills are not produced, but the amount paid without supporting bills will be taxable. Similar treatment is to be given for LTA and HRA.
You can prepare this and have the proposed structure vetted by your finance head, who must be dealing with company taxation.
Regards,
RDS Yadav
From India, Delhi
Acknowledge(1)Amend(0)
You are inquiring about the salary structure. You can also design it. For example, include components like Basic Salary, HRA, Conveyance Reimbursement, Medical Allowance, and LTA. There should be components that, under Income Tax, can be allowed and are beneficial to employees. This should be a point to consider when finalizing the structure.
Expenses on medical treatment, if reimbursed, can go tax-free, allowing one to save from income tax, provided it has been reimbursed subject to Rs. 15,000/year if bills are produced. The company can pay even if bills are not produced, but the amount paid without supporting bills will be taxable. Similar treatment is to be given for LTA and HRA.
You can prepare this and have the proposed structure vetted by your finance head, who must be dealing with company taxation.
Regards,
RDS Yadav
From India, Delhi
Acknowledge(1)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Creating a Competitive Salary Structure.doc
Salary Structure.zip