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How to Claim Medical Allowance

Medical Allowance is an amount of cash paid to employees through a company as part of their basic salary to satisfy their medical needs. This Allowance is given to the employees every month, whether or not the employees submit the medical bills to confirm the expenses. However, such a salary is taxable every month under the heading “salary from other sources.” In this article, we are going to tell you about the Medical Allowance in detail.

What is Medical Allowance?

Medical Allowance is an amount of money that an agency contributes to an employee’s basic salary slip to cover medical costs. Whether or not the employee files the medical bills, they will get access to this Allowance each month.

How do Reimbursements of Medical Costs work?

The process starts with acquiring a prescription from a doctor and a bill from the healthcare sector that provides healthcare services. The bill will encompass information consisting of the name of the service, the date, the amount charged, and other applicable facts. These bills and prescriptions are then submitted to the company or insurance company for Reimbursement.

Medical Reimbursement is a simple and easy method. The employee has to show their medical expenses, so for this, they receive a medical bill from the provider and submit it to their company or insurance company for Reimbursement. The company will then reimburse the amount paid by employees.

Reimbursements for Medical Expenses

Medical reimbursement policies are set by authority. Unlike Allowance, medical reimbursements are exempt from tax to a certain amount. Currently, reimbursements up to Rs. 15,000 each year are exempt from taxation. To declare this exemption, all employees must submit the medical bills for their medical expenses. Some other requirements that need to be met to claim medical allowance exemption are given below.

  • Any employee can claim reimbursements for themselves and their spouse, dependent parents, siblings, and children. Note that any medical allowance for siblings or dependents is possible to claim if they have proper medical bills, and it is best once they do not depend on the employee.
  • Medical bills and related documentation can cover every part of a reimbursement. Hospitalization, surgical costs, any medicines sold from retailers, and every other expense for post-hospitalization care can be part of reimbursement claims. This is mentioned under Section 17 (2), Clause (b) of the IT Act, 1961.
  • All components of medical reimbursements are mentioned in Section 80D of the IT Act of 1961. The employees need to submit all documents to the company. If there is a delay by employees in submitting the necessary documents, 30% of the Rs. 15,000 exemption can be used for taxation. However, the employee can claim this 30% if they file tax returns.
  • Under Section 80D, a medical allowance exemption every year is considered a deduction to a maximum of Rs. 40,000. Besides hospitalization and related expenses, this exemption also covers travel costs.  

Benefits of Medical Allowance

Here are a few benefits of medical Allowance

  • Covers medical prices: The benefit of medical Allowance is to reimburse is that it covers the medical costs that a person incurs. This benefit gives economic assistance to people and facilitates them to cover the cost of their treatments.
  • Tax advantages: Medical allowances provide tax benefits. It means that the amount reimbursed is tax-free.
  • Prevents unexpected financial costs: Medical Allowance can help individuals cover sudden medical expenses.
  • Access to quality healthcare: Medical Reimbursements give access to a person to quality healthcare without dealing with huge medical costs. It also ensures timely treatment without any economic burden.

Must Read:- What is Medical Allowance in Salary Slip | Tax Benefit To Employee On Medical Reimbursement

Medical Allowance vs Medical Reimbursement

Sometimes, humans use the words Medical Allowance and Medical Reimbursement together. Although both are payable to employees towards medical costs, the tax implication is specific. Medical Allowance is given to employees on a monthly basis as part of the salary. However, it’s completely taxable regardless of any submission of medical bills to your company. So, an employee does not need to submit medical bills to the organization to get a medical allowance. It is paid to him as a monthly fixed amount that is part of his salary. As per phase 17(2) of the Salary Tax Act, Reimbursement towards medical expenses of Rs 15,000 in a year.

What Is A Medical Allowance Exemption?

Clause (v) of Section 17 (2) of the Income Tax 1961 allows a tax exemption of as much as Rs. 15,000 on such medical reimbursements. Thus, the maximum limit allowed is up to Rs. 15,000 per annum. If an employee is provided an allowance instead of Reimbursement for medical treatment, it is going to be taken into consideration as part of the taxable component of the salary of the employees.

Medical Allowance Exemption Eligibility

The 1961 Income Tax Act states that medical allowance calculation of expenses is not a prerequisite/allowance for employees. Hence, for medical allowance exemption, the following conditions need to be met.

  • The employee has to have spent the amounts claimed monthly by getting medical treatment incurred on himself, his partner, children, parents, and other dependents.
  • Such amounts have to be covered as medical Reimbursement to be reimbursed by the organization.
  • Reimbursed amounts from the company do not exceed the medical allowance exemption limit of Rs 15000 in that Final year.

Claiming Tax Deductions on Medical Expenses

With the increasing cost of medical care in India, it is important that every salaried individual stay updated on tax deductions on their medical expenses. For example, Section 80D has provisions to find exemptions on medical health insurance. If employees take out insurance for themselves, their partners, and their kids, they can claim a deduction of Rs. 25,000 per year.

Additionally, if coverage is taken out for dependent parents, an additional exemption of Rs. 25,000 may be claimed in a year. These benefits apply to all insurance regulations granted by IRDA-acknowledged coverage companies. If dependents are senior citizens, the employee can declare exemptions of up to Rs. 50,000 every year.

Section 80DDB consists of further provisions for tax exemptions depending on age. Senior citizens of as much as 80 years can apply for exemptions of as much as Rs. 75,000 every year. Any dependent who is older than 80 falls under the ‘old age senior’ citizen bracket and can claim as much as Rs. 1 Lakh on exemptions every year.

How to claim your Medical Allowance?

Employees need to provide the following information to their employers to claim Medical Allowance.

  • Medical expenses: Employees must have their medical bills paid during the year. The employee or a member of their family needs to be mentioned on invoices.
  • Medical certification: Employees must get an accurate medical file from the medical expert or hospital in which they or members of their family got treatment. The certificate needs to consist of the patient’s name, the date of medical care, the type of illness, and the cost of medical care.
  • Claim form: Typically, employers give a claim form to employees to fill it with their information and submit it with their medical certificates and medical prices.

The company will check the request for Reimbursement and give you medical allowances after verifying your complete information and medical bill documentation.  

Things to Remember about Medical Reimbursement

Here are some things about medical Reimbursements that you should know

  • You can’t file an application for medical expenses from the preceding financial year.
  • Private or government hospitals, which your company may own, don’t have any maximum limit on payments for Allowance.
  • Premiums for mediclaim regulations are included in Section 80D benefits.

Conclusion

A medical allowance is a monthly amount that employees give to help with medical costs. Employees may also deduct as much as ₹15,000 in taxes under Section 10 of the Income Tax Act, but the thing is that the allowance benefits are taxable.

Medical Reimbursements are tax-free for employees for verified medical expenses. Employees need to spend monthly payments on medical care for themselves and their family members to qualify for the medical allowance exemption, and the organization’s medical health insurance must reimburse the amount.

With a tax exemption of up to ₹15,000, the medical reimbursement exemption enables employees to post medical bill payments to their employers. According to the union finances for the financial year 2023-24, clear proposals and minor changes have been made regarding basic deductions for the benefit of employees.

FAQs:-

How do I declare a medical allowance exemption?

Medical Reimbursement comes under Section 80D, in which the maximum limit is Rs. 15,000 p.A. If payments regarding medical Reimbursements are not submitted on time by the employee, 30% of Rs. 15,000 will then emerge as the taxable amount. However, at the same time as filing tax returns, employees can claim 30% of the amount.

How do I declare medical Reimbursement?

In order to declare a claim, you need to get treatment in a hospital or medical facility of your company. Contact your firm’s branch and inform them about your declaration. Provide all the bills associated with your treatment. You also need to fill out the medical Reimbursement declaration form to become eligible to claim it.

How can I declare medical expenses on my income tax?

If you’re salaried, you may claim the 80D deduction by submitting insurance receipts or medical payments to your agency, or you may also declare it while filing your income tax return (ITR). 

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