Income Tax Medical Bills Exemption Under Section 17(2)

A medical reimbursement is a benefit offered by employers to the taxpayers in order to reimburse their medical expenses they incurred in hospitals. The Income Tax Department does not levy any tax on the same, and the reimbursement is tax-free. However, the exemption is free from tax only up to Rs. 15,000.

Family members covered under the medical reimbursement

  • Employee, Spouse, Children no matter they are dependent, married, independent or unmarried.
  • The sisters, brothers and parents who are completely dependent on the employee.

Reimbursement conditions

To get the reimbursement advantage, the employee firstly has to submit all the medical bills to his employer.

The bills do not necessarily require belonging from government hospitals. It can be from any particular hospital.

One has to present bills of private clinics or hospitals to ensure tax free reimbursements from the medical section.

Any amount higher than Rs. 15,000 will be added to the salary of the employee. The income tax will be paid as per the income tax slab normally.

Tax Free Perquisites U/S 17 (2)

The employer should maintain the medical bills for treating the employee or family members.

The certified authorities should from government hospitals or hospitals maintain the bills for the treatment of employee or family members.

The Rule 3A in the Income Tax rules mentions the diseases or ailments permitted for reimbursement. The Chief Commissioner of Income tax provides the list to the hospitals.

In order to get the reimbursement, the employee should provide the certificate issued by the hospital with ITR filing. The document mentions the ailment or disease for which treatment is offered. Further, the bills paid to the hospital should also be attached.

The reimbursement is also given for insurance premium for employee or family under section 80D within the General Insurance Corporation of India.

Tax-free Prerequisite for Medical Treatment Abroad

In case an employee or members of his family have been treated abroad, the amount of reimbursement is tax-free to an absolute limit. This limit is defined by the Reserve Bank of India as it has to the authority to decide and change the limit of non taxable income.

One has to necessarily have the bills that were made during the medical treatment of the employee of any family member along with the attendant arranged or hired to accompany the patient.

The expenses incurred on the travel of the employee or the family member of the same along with the attendant of the patient is tax-free. The employee's income should be less than ₹2, 00,000 to enjoy tax-free expenses.

If the gross salary of the worker is more than Rs. 2, 00,000, then the travel expenditures of the employee of the patient shall be subject to taxes.