You may be taxed if your employer pays your medical bills.

You may be taxed if your employer pays your medical bills.
Income Tax , by Kanishka and Associates  on : Oct. 22, 2018

Income Tax

Yes, your medical bills paid by your employer may get added to your salary income and taxed. But there are some points that can save you from that tax. You can read them in the ripple below. If you remember them and do some planning and a little effort, then you may save the tax. You or your family (i.e., your spouse or parents or children) may have to do some google on hospitals in your locality or visit them to match them with the points below.

When are your medical expenses taxed?

The medical expense that you pay is not taxed. But if your employer pays them for you or if it reimburses you then they become your income.

Reimburses you means that you pay the bill. After paying you give bills to your employer. And your employer in turn pays you back.

for example: You buy Calpol from medical store for Rs10. You take this Rs10 bill to your employer. He pays you back Rs10. In legal jargon, your employer has reimbursed Rs10 to you.

What should you do to not get them taxed?

If you have good government hospitals (that you like) then prefer to get treated there. Reimbursements for treatment in government hospitals are tax free.

Government hospitals mean hospitals maintained by Government, Local Authority or any other approved hospitals.

If you prefer private hospitals then please do a little of this research.

  1. Make a list of private hospitals.
  2. Go to the hospitals website.
  3. Find out the hospital phone number and call them up.
  4. Ask the hospital whether it is approved by Chief Commissioner of Income tax under provision (ii) (b) of clause (viii) of section 17(2) of Income tax Act or not.
  5. Generally the hospital reception or staff understands; In case it doesn't then in 90% of cases they are not approved.
  6. If you prefer the hospital then go to it. Meet the Mediclaim department. They know about approval. You can ask them.
  7. Your hospital research ends here.

If God forbid, some one of your family falls sick. You should rush them to these approved hospitals only.

Your family means your spouse, dependent parents and unmarried children. They may not be staying with you.

When they get OK, pay the bills. And collect these 3 documents too.

  1. The bills.
  2. Along with bills, collect the certificate from hospital stating that it is approved under provision (ii) (b) of clause (viii) of section 17(2) of Income tax Act.
  3. A copy of approval letter by Chief Commissioner of Income tax.

Submit all these 3 with your employer. And tell the team to not add the reimbursement to your salary.

How would you know that medical reimbursement have not been added to you salary?

You can't find it instantly. But you can track it in your form 16. Form 16 is also called Salary TDS certificate.

Form 16 has 2 parts. Part A and Part B.

Part A is issued by Government of India.

Part B is issued by your employer.

Part B has 2 sections.

In section 1, employer gives the break up of how he computed taxes.

You don't have to worry about the above.

You should go straight to Part B Section 2.

Section 2 shows you the details of perquisites added to your salary. Look for Medical expense perquisite. It shouldn't have any amount.

And if it has then rush to your employer. Ask him to revise the form 16. He can easily do it.

And in case, he doesn't then remember to exclude it from your taxable salary-income when you file your tax returns.

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