Any perquisite in one form of a medical allowance is typically taxable. On the other hand, reimbursement by an employer of medical expenses incurred by an employee is basically tax-free.
The full picture can be explained well by the following diagram:
The brief discussions of all the above Cases are explained below:
Case 1:Â Â Â Own Hospital
The value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer i.e. employerâ€™s own hospital is fully exempt from income tax without any monetary limit.
Case 2:Â Â Â Govt. Hospital
The Medical treatment facility provided by an employer in government hospital is fully tax-free. Therefore, one can avail the benefit of the same for self & its family member.
Â Case 3:Â Â Specified/ Private Hospital
An employee may sometimes be given treatment at a private hospital and not necessarily at a hospital maintained by the Government or any local authority. A hospital is normally treated as a private hospital if it is approved by the Department of Income Tax.
Therefore, treatment of specified diseases (Cancer, Tuberculosis, Immunity deficiency, etc) in a specified hospital is fully exempt.
Moreover, if loan is taken for medical treatment of specified diseases of employee or his family members, then amount of perquisite is not taxable. But however, if the loan is reimbursed to the employee under medical insurance scheme then exemption is not at all available to the extent the loan is reimbursed.
Here, Family means:
a)Â The spouse of the individual.
b)Â The children of the individual.
c)Â The parents, brothers & sisters of the individual, wholly or mainly dependent on him.
Also, children include:
a)Â Dependent or independent children.
b)Â Married or unmarried.
c)Â Major or minor.
In the case, the person does not form the part of family, then the entire amount is taxable.
Apart from the above the concept of Medical treatment in Foreign Country is also very interesting.
Medical Treatment in Foreign Country:
- Medical treatment provided outside India to employee & its family members & one attendant is exempted to the amount permitted by the RBI.
- Also, the amount of travelling expenses is exempt, only if Gross Total Income of the employee (before including travelling expenses), does not exceed Rs.2, 00,000.
Gross Total Income: Basic Salary + DA + Allowances + Perquisites.
The above perquisite in respect of medical treatment can be well explained with the following cases of Mr. X mentioned below:
The employer provides medical treatment to employee (X) as well as his family members is. The expenses incurred on them are as under:
Â i. Â Treatment of X Rs 8000.
Â ii.Â Â Treatment of Xâ€™s major son (dependent on him) Rs.2000.
iii.Â Â Treatment of Xâ€™s handicapped uncle Rs. 1000.
iv.Â Â Treatment of Xâ€™s grandfather Rs.1500.
Â v.Â Â Treatment of Mrs. X Rs.2000.
vi.Â Â Treatment of Xâ€™s old mother Rs.4000.
vii. Treatment of Xâ€™s brother (not dependent) Rs.1000.
Since, the above medical treatment falls in other case so amount to the extent of Rs.15000 is only exempt. Also, the limit is applicable to the person falling in the definition of the family & the excess amount is taxable in the hands of an employee.
Â Moreover, the grandfather & handicapped uncle does not form the part of defined family, so the amount spent on them is fully taxable.
|Â Â Â Â Â Â Â Â Â Â Â Â Â Particulars (Cases)
|(i)+ (ii) + (v) + (vi) = Rs.16000 â€“Rs.15000
|(iii) + (iv)
|Therefore, total amount taxable is Rs.3500.
Points to be noted related to above illustrations:
- If the above example is provided by an employer maintaining its own hospital & providing free treatment then entire amount of Rs.16000 would be exempt. The amount of Rs.2500 would be still taxable as the persons are not in the definition of family.
Moreover, if the expenses are incurred for cancer treatment (specified disease) of married daughter of X at Birla Cancer Hospital (specified hospital), and then the entire amount is exempted as married daughter falls under the head of family.