Check About Tax Exemption on Medical Reimbursement

Health insurance policies help individuals by the means of reducing their financial burden in various ways. They help people by offering necessary coverage for medical expenses that could arise in the future. Another way is by helping them save money using providing tax exemption available under section 80D of the Income Tax Act. Apart from this, the employees can also avail of other tax benefits referred to as Medical Reimbursement, wherein a part of medical expenses incurred by the employee is reimbursed by the employer.

What is Medical Reimbursement?

Life and health insurance policies are some of the benefits that an employer provides to its employees. Also, health cover is offered to the family members of the employee including spouse and children.

Talking about the savings part on healthcare expenses, the option of medical reimbursement can be availed of by the employees wherein the employer would reimburse their medical expenses. As per the Income-tax Act, a tax exemption on medical reimbursement is offered for up to Rs. 15,000.

Tax Exemption on Medical Reimbursement

No tax is charged for medical reimbursement of up to Rs. 15000 by the Income Tax Department. Also, this option is available for some of the family members as well. Some of the employers offer the benefit of medical reimbursement tax deduction wherein the taxpayers are permitted to reimburse the incurred medical expenses in a hospital. However, the entire reimbursement is free of tax.

Coverage for Medical Reimbursement is for the following members of the family:

• Spouse or Children( unmarried, married, dependent, or independent) of the employee
• Dependent parents, sister, and brother of the employee

Medical Reimbursement Tax Benefits Conditions

The conditions mentioned below should be followed to reimburse the medical expenses:

• All the bills incurred on medical expenses should be submitted by the employee to the employer to avail of this facility.
• The bills shown by the employee may or may not belong to any particular hospital or a government-authorized hospital.
• For tax exemption on medical reimbursement, private hospitals or clinic bills can also be furnished.
• In case the amount of medical expenses exceeds Rs 15000 by the employee, the additional amount is included in the head salary during ITR filing. Income tax would be liable on that sum by the employee’s income tax slab.

Points to Remember about Medical Reimbursement Tax Benefits

You should keep in mind the following things regarding tax on medical reimbursement:

• A medical reimbursement claim for the previous financial year cannot be made by the employee.
• No maximum limit is there for reimbursement of medical expenses at any of the hospitals maintained either by the Government, employer, or hospitals authorized under health schemes by the Central Government.
• There is a difference between medical reimbursement and medical allowance. Medical reimbursement is when the medical expenses incurred by the employee are reimbursed by the employer. On the other hand, medical allowance is a fixed component, wherein a certain amount is provided to the employees, which is included in their monthly salary.
• While premium paid-for healthcare plans would not be treated as a medical expense, however, benefits under section 80 D are available. Simply speaking, it would not be considered for income tax exemption under reimbursement for medical expenses but can be taken into consideration for tax deduction separately as per section 80D of the Income-tax Act.

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive and should research further or consult an expert in this regard.