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Tax treatment on Medical allowance

suresh (MBA) (46 Points)

25 June 2010

Hi All,

I have joined a new organisation in the month of April,2010. And here I am in receipt of Medical allowance of Rs.1250 pm.In my previous company I used to get medical expenses reimbursed when I produce bills and I used to get tax exemption for a maximum of 15000 PA. Now my doubt is as I am in receipt of Medical allowance on each n every month will it be fully taxed or will I get tax exemption of 15000 PA in case if I produce the bills?

Thanks in advance.

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7 Replies

Amir (Learner) (4016 Points)
Replied 25 June 2010

Dear Suresh,

Prima facie it looks like a fixed allowance, which is fully taxable.

But the question whether it will be taxable or can be claimed exempt on submission of bills, depends upon ur Employer.

If ur employer considers it as Allowance then it will be TAXABLE.

If ur employer considers it as a perk, then it can be claimed exempt on submission of bills... Bills can be produced at year end...

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suresh (MBA) (46 Points)
Replied 25 June 2010

Hi Amir,

Thanks for your reply. But still I have got one more doubt.. In the answer you have mentioned that it all depends upon the way how employer treats it. So Is it possible to consider it as Medical reimbursement even after showing it as Medical allowance in my payslip??

Shudhanshu Agrawal (Business) (2570 Points)
Replied 25 June 2010

According to me medical allowance should not be treated as medical reimbursment. If there is any reimbursment then company should have bills for it and also pay it with seprate cheque.

But in practical life company do mix up medical reimbursment and medical allowance. They provide exemption upto Rs. 15,000 for medical allowance but you should leave it to the management as its their responsibility and decision.

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