Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

[Section 17(2)]- Tax Treatment of Medical Facilities provided to an Employee – for Computing Salary Income

In the following cases, medical facility is not a perquisite and thus not taxable in the hands of the  employees.

[Section 17(2)]- Tax Treatment of Medical Facilities provided to an Employee  – for Computing Salary Income
[Section 17(2)]- Tax Treatment of Medical Facilities provided to an Employee – for Computing Salary Income

1.   Medical facility in a hospital, etc. maintained by the employer:

The value of medical treatment provided to an employee or to any member of his family in any  hospital, dispensary or a clinic or a nursing home maintained by a employer shall not be a perquisite.

2.   Medical treatment in India

The following expenditure incurred by employer shall not be a perquisite:

(a)           Any sum paid by employer in respect of:

(i)            actual expenditure incurred by employee on his or his family member’s medical  treatment in any hospital maintained by the Government or any local authority or in a  hospital approved by the Government for medical treatment for its employees;

(ii)           expenditure actually incurred by employee on his or his family member’s medical  treatment in respect of prescribed diseases or ailments as prescribed in rule 3A of the  Income-tax Rules, in any hospital approved by the Principal Chief Commissioner or  Chief Commissioner of Income-tax, having regard to the prescribed guidelines.

However, in this case, the employee has to attach along with his return of income, a  certificate from the hospital specifying the disease or ailment for which medical  treatment was required and the receipt for the amount paid to the hospital.

(b)          Any portion of insurance premium paid by the employer for insurance of the health of  the employees under a scheme approved by the Central Government or the Insurance  Regulatory and Development Authority.

See also  Rates for TDS ( Deduction of Tax at Source) given under Income Tax Act. for Financial Year 2020-21 (AY:2021-22)

(c)           Any reimbursement by the employer of any insurance premium paid by the employee,  for an insurance for his health or the health of any member of his family a scheme  approved by the Central Government or the Insurance Regulatory and Development  Authority is also a tax-free perquisite.

3.   Medical treatment outside India

The following expenditure incurred by employer on treatment of the employee or his family  members outside India is also a tax-free perquisite:

1.    Expenses on medical treatment of the employee or any member of his family outside India. However, such expenses shall be tax free perquisite to the extent permitted by Reserve Bank of India.

2.    Expenses on stay abroad of the employee or any member of his family for medical treatment with one attendant who accompanies the patient in connection with such treatment. These expenses shall also be tax free perquisite to the extent permitted by Reserve Bank of India.

3.    Travel expenses of the patient (employee or his family member) and one attendant who accompanies the patient in connection with such treatment. It shall be tax-free in the case of those employee whose gross total income (before including therein the such travel  expenditure as perquisite) does not exceed ₹2,00,000. In other words, if the gross total  income of the employee before including the taxable medical perquisite on account of travel  expenditure exceeds ₹2,00,000, the expenses on travel of the patient as well as of the  attendant shall become taxable.

Note :

(1)          Any medical allowance given by the employer is fully taxable irrespective of the actual expenses which  might have been incurred by the employee on medical treatment. 

(2)          ‘Family’ for the purpose of valuation of medical facilities means: 

(i) the spouse and children of the employee. Children may be dependent or independent, married or  unmarried. 

(ii) parents, brothers and sisters of the employee, who are wholly or mainly dependent on such employee. 

(3)          ‘Hospital’ includes a dispensary, a clinic, a nursing home. 

(4)          As per Circular No. 603 dated 6.6.1991, the expenditure on medical treatment by the employer may be by  way of payment or reimbursement. 

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