Medical reimbursement of hospitalization

This query is : Resolved

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This discussion clarifies whether medical reimbursement for hospitalisation, particularly for PSU employees treated at empanelled hospitals at CGHS rates, is taxable. Generally, such reimbursements are not considered taxable income according to government circulars. However, if your employer has deducted tax at source (TDS), it may be treated as a taxable perquisite. The advice is to get this corrected with your employer, as the Income Tax Department typically won't rectify employer errors directly. If TDS has been deducted, you can claim a refund by filing your Income Tax Return (ITR) for the relevant assessment year, though you may receive a defective notice from the CPC.

Pooja

Pooja (Querist)
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30 August 2025 I am a psu employee. I had undergone surgery in Fortis Hospital in the financial year 2024-25 at CGHS rates. The medical expense was reimbursed by my employer. Is this reimbursement taxable?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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30 August 2025 PSU employees receiving reimbursement at CGHS rates for treatment at empaneled hospitals (like Fortis) are not liable to tax on the reimbursed amount, as per prevailing government circulars and income tax rules. Check form 16.

Pooja

Pooja (Querist)
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30 August 2025 Kindly provide under which section the reimbursement is not liable to tax?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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30 August 2025 Read page 3 reply from ITD...
https://www.aibsnlretd.org/RTI%20Reply%20from%20Income%20Tax.pdf

Pooja

Pooja (Querist)
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31 August 2025 Should I apply for refund as my employer has deducted tax at source for reimbursement of my hospitalization expense?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 August 2025 If the employer has already deducted TDS, ITD will consider it as taxable perquisite. So it will be better option to get it corrected at you employer's base.

Pooja

Pooja (Querist)
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31 August 2025 In BSNL it's a practice to deduct TDS on the reimbursement of hospitalization. The employees union have given applications to correct this but they continue to deduct tax as shown in the link shared by you. What alternative do I have?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 August 2025 The mistake is from employer end, ITD will not rectify.
Union must get it rectified from BSNL desk citing the reply as attached in earlier massage.

Pooja

Pooja (Querist)
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31 August 2025 Kindly click on the view file link on this web page.
https://www.bsnleu.in/medical-reimbursement-should-not-be-treated-as-perquisite-for-income-tax--clarification-issued-by-principal-chief-commissioner-of-income-tax-up-east--bsnleu-writes-to-the-cmd-bsnl-demanding-implementation-of-the-order.

The pdf has a representation from the union along with the letter from the principal chief commissioner.
As mentioned on page 2 in point 2 (ii),

"Further as concerned with refund process of TDS made the applicant is required to file the ITR for the relevant assessment year claiming excess tax deducted within due date on e-filing portal declaring true and correct particular of income and after computing total income the refund amount if any will be generated after the return is processed"
Can I apply for refund on this basis?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 August 2025 Yes, you can, but will have to follow the query raised by CPC.

Pooja

Pooja (Querist)
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01 September 2025 In form 16 this reimbursement is included in my gross salary. In itr utility where can I show this reimbursement as non taxable?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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01 September 2025 You may report it as tax free perquisite; but CPC will not accept it and you may get defective notice.

Pooja

Pooja (Querist)
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01 September 2025 What all documents I will have to keep record of on getting defective Notice?