As a general principle, any perquisite in one form of a medical allowance is typically taxable. On the other hand, reimbursement by an employer of medical expenses incurred by an employee is generally tax-free.
If an employee receives some money for his medical treatment or the treatment of any member of his family or any of his dependant relatives then a sum up to Rs. 15,000 p.a. is not treated as a taxable perquisite as per Clause (b) of the provision to Section 17 (2) of the I.T. Act. This exemption is enjoyed by the employee only if the expenditure is actually incurred on his medical treatment or for treatment of any member of the family or a dependant relative. It may be noted here that there is no condition that the medical treatment should be at any of the approved hospitals. It could be at any place and from any type of doctor belonging to Allopathic, Ayurvedic, Unani or Naturopathy system .
The following diseases are covered in Medical reimbursement.
i(a) cancer;
(b) tuberculosis;
(c) acquired immunity deficiency syndrome;
(d) disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation;
(e) ailment or disease of the eye, ear, nose or throat, requiring surgical operation;
(f) fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopedic treatment;
(g) gynecological or obstetric ailment or disease requiring surgical operation, cesarean operation or laparoscopic intervention;
(h) ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital.
(i) gynecological or obstetric ailment or disease requiring medical treatment in a hospital .
(j) burn injuries requiring medical treatment
(k) mental disorder, neurotic or psychotic requiring medical treatment
(l) drug addiction requiring medical treatment in a hospital
(m) anaphylactic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital.
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