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Medical Reimbursement whether part of Salary or Not?

Devang Shah (Service) (26 Points)

03 October 2008

Medical reimbursement of Rs. 1,250 is exempt from tax and part of the salary structure. Whethere a company has to maintain two seperate accounts as regular salary (excluding medicl reimbursement) and reimbursement of medical expense? As far as my concern, medical reimbursement are part and parcel of the salary and no seperate accounts to be opened showing as reimbursement.

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7 Replies

Venkat Rao Marella (Manager Business Finance) (1451 Points)
Replied 03 October 2008

Even though medical reimbursements are part of salary structure, companies track them separately and book the expenses to a separate account. This will be because, companies pay the reimbursements only on submission of bills which the employees will submit through out the year depending on medical expenditure expenses incurred by them. Thus there will be a variation on month on month basis.

In order to keep this fluctuation separately from the salary cost which in most cases remains consistent, companies book the reimbursements separately.

Devang Shah (Service) (26 Points)
Replied 03 October 2008

Originally posted by :Devang Shah
"	Medical reimbursement of Rs. 1,250 is exempt from tax and part of the salary structure. Whethere a company has to maintain two seperate accounts as regular salary (excluding medicl reimbursement) and reimbursement of medical expense? As far as my concern, medical reimbursement are part and parcel of the salary and no seperate accounts to be opened showing as reimbursement.	"

Whether employee wil get benefit of claiming medical reimbursement if company does not maintaine seperate account? is it mandatory for company to maintain seperate accounts?

CA V. Mohanakrishnan (Chartered Accountant) (401 Points)
Replied 03 October 2008

it is better to maintain the same separately. further in form 16 issued at the end of the year the same is shown as gross salary and indicated as exempt under sec 10

RAVI KUMAR M (CHARTERED ACCOUNTANT) (66 Points)
Replied 03 October 2008

Bifurcation of the same will help better compliance in issuing of Form 16 and FBT calculations

soumya (Article) (40 Points)
Replied 04 October 2008

hii devang,

1st, Reimbursement of medical expenses is suppose to be as per the terms and condition of employemnt.

2nd, it is gud for a company to keep separate accounts for salary and reimbursement of medical expenses, so as to keep a better control over the amount reimbursed to employees as per their eligibility.

3rd, Form the taxation point of view, while issuing Form-16 A to an employee, the company has to separately mentioned amount exempted u/s 10.

sudarshan (CA) (745 Points)
Replied 26 March 2009

Medical reimb will be shown in form 16 as perks, as they are not section 10 benefit. These are perks under section 17.While framing CTC (cost to company) medical reimb is included as part of compensation and maximum rs.15000 is allowed. If bills are submitted, these are exempt if not they will pay the amount and tax will be deducted. These are shown as perks in form 16.

visu iyer (mentor) (828 Points)
Replied 18 July 2009

Originally posted by :sudarshan
"	Medical reimb will be shown in form 16 as perks, as they are not section 10 benefit. These are perks under section 17.While framing CTC (cost to company) medical reimb is included as part of compensation and maximum rs.15000 is allowed. If bills are submitted, these are exempt if not they will pay the amount and tax will be deducted. These are shown as perks in form 16.	"

Sorry my dear..

Fixed Medical allowances are taxable at the hands of Employee

Reimbursement of Medical expenses are exempted in the hands of employee upto Rs.15000

Buzz me if u need anything more...