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Perquisite – section 17(2)

This query is : Resolved 

Querist : Anonymous (Querist) 03 August 2011

An employer has empanelled with super speciality hospital which is approved by CCIT u/s 17 (2) for surgical treatment. Employer reimburses cost of surgical treatment to employee for self or dependent of employee. Salary income of employee is considered net of reimbursement, as the reimbursement of medical expenses to hospital approved u/s 17(2) is exempt, based on approval accorded by CCIT.

In turn employer has covered concern employee under group medical insurance scheme and therefore file claim (cost of surgical treatment duly reimbursed to employee) with Insurance Company.

Employee claiming legitimate tax exemption u/s 17(2) and employer filing claim with Insurance Agency are supposed to on the right side of law.

Please confirm if above position is not tenable.

03 August 2011

Yes the things are in right direction and tenable in law provided the employer credits the insurance claim receipts in his books of account against the expenditure incurred by the employer himself.

Querist : Anonymous (Querist) 04 August 2011

Thanks a lot for earlier response.

I am now bit more inquisitive with regard to prevailing practices followed by most of employer.

Employers do reimburse cost of medical / surgical expenses to employees and in turn claim the same from Insurance Companies under Group Medical Scheme. Premium paid for such cover is admissible expenses for employer.

However, compensation structure followed by most of employer does have pay head medical reimbursement, restricted to Rs. 15,000 per annum and availed by across the board by all employees.

Now question whether an employee who happen receive reimbursement of medical expense over and above medical allowance, maximum exemption restricted to Rs. 15,000 is suppose to be taxed under perquisite or not.

Or perhaps there are legitimate exemptions, which i am not aware of.


04 August 2011

1. Medical Reimbursement exempt Up to Rs. 15000/- in case of all employees against production of medical bills etc.

2. Fixed Medical Allowance is taxable.

3.Reimbursement of expenses incurred on treatment of the employee and dependents
in Govt Hospitals or in Approved hospitals as you have described are exempt.

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