What is Medical Reimbursement? Eligibility, Benefits

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Updates and details for What is Medical Reimbursement? Eligibility, Benefits:

A Medical Reimbursement is a plan where an employer reimburses uninsured general medicine or accident expenses incurred by the employee or his dependents.

Many companies allow employees to submit their medical bills and reimburse the expense incurred by them. Some companies even have tie-ups with hospitals and clinics where the employees can get medical treatments done and then reimburse the expenses. It is this reimbursable amount, submitted to the employer with bills and receipts, which is tax-free.

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Eligibility to claim Medical expenditure?

Under the Income Tax Act, specific conditions have been specified so that such expenditure is not considered as a perquisite in the hands of the employee:

i)         Employee should have spent the amount on medical treatment;

ii)        The amount should have been spent on his own or his family* members’ treatment;

iii)        Such amount should be reimbursed by the employer;

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iv)       Amount reimbursed by the employer does not exceed Rs15,000 in the financial year.

*Family for the above purpose includes spouse and children of the individual and parents, brothers, and sisters of the individual or any of them, who are wholly or mainly dependent on the individual.

Benefits of Medical Reimbursement:

The main benefit of medical reimbursements is that it helps reduce taxable income of employees. The downside, though, is that in order to avail the tax benefits, medical bills worth Rs.15,000 need to be submitted.

Reducing Taxable Income through Medical Reimbursement – Example:

Ravi works for a company where his salary slip is as given below. He is paid a sum of Rs.1,250 every month under ‘Medical’.

Employee No – 1234 Name – Ravi Bajaj
Joining Date – 21/2/2016 PF No – SB/AYE/1325746/132/1327465
BASIC 20,000 PF 2,400
HRA 8,000 PROFESSIONAL TAX 200
CONVEYANCE 2,500
SPECIAL ALLOWANCE 4,000
MEDICAL 1,250
LTA 3,000
Total Earnings 38,750

He falls ill for a few weeks and his medical treatment cost him Rs.8,000. He can submit the bills for this amount for reimbursement from the company. This will bring down the taxable income by Rs.8,000. The balance amount of Rs.7,000 will be taxable.

Also Read: What is House Rent Allowance? Calculation, Exemption Rules

List of Expenses cannot be covered under Medical Reimbursement

  • Cosmetics & Cosmetic Surgery
  • Dancing Lessons
  • Ear piercing
  • Electrolysis
  • Exercise Equipment or Programs
  • Face Lifts
  • Fitness/Weight Loss programs and drugs
  • Funeral expenses
  • Hair Removal
  • Hair Transplant
  • Herbs and Herbal Treatments
  • Illegal operations and treatments
  • Massage Therapy to relieve stress or depression
  • Maternity clothes
  • Non-Prescription Drugs and Medicines
  • Teeth Whitening

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