The reimbursement of medical expenses incurred by the employee, by the employer is liable for medical bills exemption up to an amount of Rs. 15000 in India.
In India Income Tax Act provides for medical bills exemption of the amount that is less than or equal to Rs. 15000. This medical bills exemption is granted if the employee furnishes all the bills to the employer. The employer offers the facility of reimbursing the medical expenses incurred by the employees.
The income tax relaxation of Rs. 15000 is for the total medical expenses occurring during the financial year by the employee for itself or its family. Here, family refers to employee’s spouse and children, along with wholly dependent parents and siblings of the employee.
The medical expenses incurred in any hospital, Government or private, will be allowed for exemption in Income Tax. The only essential condition is that the employee should provide for all the bills to the employer.
Further, if the employer reimburses any amount over and above Rs. 15000, that amount will be added to the salary of the employee and will be taxed under Income from Salaries. The tax will be applied as per the slab rates of the Income Tax.
However, it is important to differentiate medical bills exemption with medical allowance in salary. Many employers provide medical allowances to their employees. Unlike, medical bills exemption this benefit is provided whether or not the medical expenses are incurred by the employee or not. The employer provides the demanded amount to the employee. The employee is not even required to submit bills for its expenditure. Hence, medical allowance is fully taxable in the hands of employees.
Apart from the above exemption, the following are also not taxable as per section 17(2) of Income Tax Act if treated in India:
Any amount of medical expenditure incurred by the employee for self or family at a hospital run by the employer.
Any amount reimbursed for treatment in Government hospital or a hospital maintained by local authority or hospital which is approved by the Government for employees’ treatment.
Any amount paid by the employer towards the scheme of General Insurance Company for insuring the health of the employee.