Medical allowance is taxable. Under the income tax any amount paid as allowance is considered as a part of salary and hence it becomes taxable.
Medical allowance monthly paid in salary is 1250, annually it is 15000.00
Medical reimbursement upto of Rs.15000.00 per year made by an employer to employee are exempted from payment of income tax. For this employee has to claim this reimbursement.
For claiming reimbursement of expenses, every employee is required to give undertaking or to submit bills to support the claim.
These expenses may be in shape of doctor’s consultation fee, purchase of medicines or payment of fee / charges towards pathological test. The expenses can be on him / her self or other dependents of the family including father, mother, or dependent brother sister.
To claim reimbursement employee must keep the support with him / her even though the same has not been asked for by the employer. Onus to prove is with the employee only because he/she is availing tax benefits from income tax authorities against these reimbursements.
Points to be remembered
- Medical allowance is a fixed allowance paid every month to the employees irrespective of the fact whether they submit the supporting bills or not.
- Medical reimbursement is a payment made to an employee against the medical bills produced by him/her subject to his/her entitlement.
- The maximum tax benefit available is Rs.15000 per annum.
- To help your employees claim tax benefit, kindly advise them to submit bills for the amount of allowance received every month so that there is no problem
Process to claim tax benefit on your medical expenses is -
- Awareness – Know the various income tax sections available to claim tax benefits on your medical expenses
- Documentation – Keep records of your medical expense, like medical bills, doctor prescription, etc
- Benefit Period – Medical expenses tax exemption are on financial year basis. That is your tax exemptions need to be claimed within the financial year in which your medical expenses occurred. Medical expenses cannot be carried forward to subsequent financial year for claiming tax exemptions in subsequent financial year
- Expense Reporting – Submit all your medical expenses data and documents to your company payroll or CA before end of financial year. So that your exemptions for tax savings is accommodated in your taxation before the end of financial year. Do not wait till end of financial year, and then try to claim tax refund from Income Tax Department. As getting tax refund is tedious and takes its own time running into months to years