Medical Reimbursement=FBT?

Save Share

This query is : Resolved

Arun (Querist)

14 January 2009 Is Medical Reimbursement a Fringe Benefit? Our company deducts FBT on such amounts, is it correct approach according to you?

CA.ViVeK M ACA

CA.ViVeK M ACA (Expert)

14 January 2009 Fringe benefit tax is an additional income tax on the benefit provided or proposed to be provided by the employer to the employee inconnection with the employment... so the medical re imbursement is in the nature of Fringe benefit.

Prashant

Prashant (Expert)

14 January 2009 At present, if any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and it exceeds Rs 15,000 during the year, such sum is 'salary' as defined in clause (1) of section 17 of the Income-tax Act and liable to income-tax in the hands of the employee.

There is no change in this position. Since such sum is taxable in the hands of the employee, the same is not liable to FBT.

However, if any sum is paid by the employer for expenditure actually incurred by the employee for medical treatment in an unapproved hospital and it does not exceed Rs 15,000 during the year, such sum does not fall within the meaning of 'salary as defined in clause (1) of section 17 of the Income-tax Act and not liable to income-tax in the hands of the employee.

There is no change in this position. Since such sum is not taxable in the hands of the employee, the same is liable to FBT.

Expenditure by the employer on Group Health Insurance or Group Medical Insurance or Group Life Insurance is for the purposes of employee welfare and, therefore, falls within the scope of clause (E) of sub-section (2) of section 115WB of the Income-tax Act. Accordingly, such expenditure is liable to FBT. However, if such expenditure is a statutory obligation, the same would not be liable to FBT.

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)

14 January 2009 Yes, if medical reimbursment is for less then Rs.15000/- per employee. Over and above Rs.15000/- it is taxable in the hands of employee under salary.

Arun

Arun (Querist)

14 January 2009 Thank you all for your replies.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now