In the following cases, medical facility is not a perquisite and thus not taxable in the hands of the employees.
(A) 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 an employer shall not be a perquisite.
(B) 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.
(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.
(C) 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:
- 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.
- 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 perquisites to the extent permitted by Reserve Bank of India.
- 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 employees whose gross total income (before including therein the such travel expenditure as perquisite) does not exceed Rs. 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 Rs. 2,00,000, the expenses on travel of the patient as well as of the attendant shall become taxable.
| (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) Reimbursement of any amount actually incurred by the employee for obtaining his or his family member’s medical treatment either in any hospital, nursing home, clinic or otherwise shall also be treated as perquisite. (3) ‘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. (4) ‘Hospital’ includes a dispensary, a clinic, a nursing home. (5) 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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EXAMPLE:
Compute the taxable value of the perquisite in respect of medical facilities availed of by X from his employer in the following situations:
(a) the employer reimburses the following medical expenses:
(i) treatment of X by his family physician Rs. 4,200
(ii) treatment of Mrs. X in a private nursing home Rs.3,600
(iii) treatment of X’s mother (dependent upon him) Rs.1,200 by a private doctor
(iv) treatment of X’s brother (not dependent upon him) Rs.400
(v) treatment of X’s grandfather (dependent upon him) Rs.1,500
(b) The employer pays an insurance premium of Rs.3,000 under a health insurance scheme on the health of X.
(c) The employer maintains a hospital for the employees where they and their family members are provided free treatment. The expenses on treatment of X and his family members during the previous year 2022-23 were as under:
| Rs. | |
| (i) treatment of X’s major son (dependent upon him) | 2,200 |
| (ii) treatment of X | 5,200 |
| (iii) treatment of X’s uncle | 4,600 |
| (iv) treatment of Mrs. X | 8,000 |
| (v) treatment of X’s widowed sister (dependent upon him) | 4,100 |
| (vi) treatment of X’s handicapped nephew | 2,500 |
(d) Expenses on cancer treatment of married daughter of X at Tata Memorial Hospital, Mumbai (an approved hospital for this purpose) paid by the employer Rs.50,000 and reimbursement of expenses for medical treatment of himself amounting to Rs.20,000.
(e) The following expenses on treatment of X’s major son outside India were paid by the employer.
| Actual expenses | Expenses permitted by RBI | ||
| Rs. | Rs. | ||
| (i) | Actual medical expenses | 75,000 | 60,000 |
| (ii) | Expenses on stay abroad of X’s son and brother who accompanied the patient | 65,000 | 45,000 |
| (iii) | Travelling expenses of X’s son and X’s brother | 1,20,000 | – |
Assume that the other income of X is (a) Rs.1,50,000 (b) Rs.1,80,000.
SOLUTIONS :
(a)
| Expenses Taxable | ||
| Rs. | ||
| (I) | Treatment of X | 4,200 |
| (ii) | Treatment of Mrs. X | 3,600 |
| (iii) | Treatment of X’s mother | 1,200 |
| (iv) | Treatment of X’s brother | 400 |
| (v) | Treatment of X’s grandfather | 1,500 |
| 10,900 |
The entire Rs.10,900 shall be taxable perquisite.
(b) Payment of insurance premium on the health of the employee is a tax-free perquisite. Hence nothing is taxable.
(c) The expenses of medical treatment of the employee and his family members in a hospital maintained by the employer are tax-free. Therefore, expenses on treatment of X, X’s major son, X’s widowed sister and Mrs. X are not taxable. Only the following expenses are taxable:
| Rs. | ||
| (i) | Treatment of X’s uncle | 4,600 |
| (ii) | Treatment of X’s handicapped nephew | 2,500 |
| Taxable perquisite | 7,100 |
(d) Expenses on medical treatment of the employee/family members in respect of prescribed diseases, in any hospital approved by the Chief Commissioner of Income-tax, are tax-free. In this case, as cancer is a prescribed disease and Tata Memorial Hospital, Bombay is approved by Chief Commissioner of Income tax, there is no taxable perquisite. Reimbursement of Rs.20,000 for his medical treatment shall be a taxable perquisite.
(e) In respect of medical treatment outside India, the expenses on actual treatment and on stay abroad (of the patient and one attendant) are exempt from tax to the extent permitted by the RBI., i.e., up to Rs.60,000 and Rs.45,000, respectively. Therefore, balance Rs.15,000 and Rs.20,000 shall be taxable perquisites. Expenses of travel are exempt only if the gross total income of the employee is up to Rs.2,00,000. In case of (a), the gross total income shall be Rs.1,85,000 (1,50,000 + 15,000 + 20,000); hence, the entire expenditure on travel is tax-free perquisite. In case of (b), his gross total income shall be Rs.2,15,000 (1,80,000 + 15,000 + 20,000); hence the entire expenditure on travel amounting to Rs.1,20,000 shall be taxable perquisite.
Rs. 15,000 + Rs. 20,000 included above are on account of taxable amount of medical perquisites as these are in excess of amount permitted by the RBI.
