A Guide to Tax Exemption on Medical Reimbursement

HEALTH INSURANCE PLAN



Medical insurance plans help people by minimising their financial burden in various ways. One is by offering a good coverage for an affordable premium that must be paid at regular intervals. Another way they help a person save money is by offering tax exemptions under Section 80D of the Income Tax Act, 1961. 

Medical Reimbursement Exemption Section under the I-T act allowed a person to save up to Rs 15,000. However, after the announcement of Union Budget 2018, a Standard Deduction of Rs 40,000 from salary income to employees replaced the feature of tax exemption on medical reimbursement and annual transport allowance of Rs 19,200 in a financial year. After an amendment, the standard deduction has been raised to Rs. 50,000. 

Here’s more information. 

About Medical Reimbursement

A mediclaim policy and life insurance are some major benefits that employers offer their employees. In fact, medical cover is also available for the employee’s family including spouse and children. 

Speaking about savings on medical expenses, medical reimbursement is an option available to employees wherein their medical treatment costs are reimbursed by their employers. Under the I-T act, there is a tax exemption of up to Rs 15,000 on medical reimbursements. 

Eligibility Criteria to Claim Medical Expenses

The Income Tax Act prescribes some conditions for eligibility as mentioned below: 

  • The employee must have spent the money on medical treatment expenses only. 
  • The amount for treatment must have been spent on self or family members that may include spouse, children, parents or siblings and other dependants. 
  • The specified amount, which does not exceed Rs 15,000 in a financial year, must be reimbursed by the employer.

The exemption is available only on the actual expenses on medical bills that the employee has spent. The bills could be those received from pharmacies or treatment taken in clinics, private or public hospitals. 

Steps to make Medical Reimbursement Claim

The employee can make a medical reimbursement claim by following a simple procedure. Firstly, he or she must submit the original medical bills to the employer. They must consider the following conditions: 

  • The medical bills may belong to private clinics or hospitals
  • If the expenses exceed Rs 15,000, it will be included to the employee’s salary and added to their taxable income at the time of ITR filing.  

Thereafter, the employer would reimburse the medical expenses up to the maximum limit of Rs 15,000 without any tax deduction.  

Things to Note about Medical Reimbursement

  • An employee cannot make a medical reimbursement claim for the previous financial year. 
  • There is no maximum limit in case of reimbursements for medical expenditure availed at hospitals maintained by the employer.
  • Medical reimbursement is different from medical allowance. The former is a feature wherein the employee’s medical expenses are reimbursed by the employer whereas the latter is a fixed component i.e. a specified amount offered to an employees, as part of this monthly salary, to help for their medical bills
  • The premium paid towards the mediclaim policy is not regarded as a medical expense. Hence, it will not be taken into consideration for income tax exemption under medical reimbursement. However, the premium can be considered for income tax deduction separately under Section 80D. 

Make health coverage a priority for your family by opting for health insurance plan by Care Health Insurance (Formerly Religare Health Insurance).