In lieu of transport allowance and medical reimbursement, now standard deduction has been introduced in the act. As per an amendment in the Budget 2018, tax exemption on medical reimbursement amounting to INR 15,000 and transport allowance amounting to INR 19,200 in a financial year have been replaced with a standard deduction of INR 40,000. This amendment became applicable from FY 2018-19 (i.e. starting 1st April 2018). From FY 2019-20 onwards, the standard deduction has been raised to Rs. 50,000. (Amended in Budget 2019) so medical reimbursements are taxable.
Bills incurred for medical treatment of employee or family members of the employee in a hospitals maintained by the employer. Bills incurred for medical treatment of employee as well as his or her family members in government hospitals or hospitals maintained by local authorities or government approved hospitals. Medical reimbursement given to the employer for a specific medical treatment for the employee or the employee’s family members. The prescribed diseases or ailments that are permissible for the reimbursement are listed in the Rule 3A of the Income Tax Rules. The list is provided to the hospitals by the Chief Commissioner of Income Tax.
As per Rules 3A following are the prescribed diseases or ailments permissible for reimbursement are :-
(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 orthopaedic treatment;(g) gynaecological or obstetric ailment or disease requiring surgical operation, caesarean operation or laperoscopic intervention;(h) ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days;(i) gynaecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days;(j) burn injuries requiring medical treatment in a hospital for at least three continuous days;(k) mental disorder - neurotic or psychotic - requiring medical treatment in a hospital for at least three continuous days;(l) drug addiction requiring medical treatment in a hospital for at least seven continuous days;(m) anaphylectic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days.
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