Medical Allowance & Reimbursement : Difference, Exemption & Claim

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Hiral Vakil

Medical Allowance
Salary Components
Salary Income

Medical allowance is a fixed allowance provided to employees of the company. It is given on a monthly basis to cover any medical expenses. It is paid irrespective of whether any proofs of expenses have been submitted by the employee or not. However, in order to claim tax benefits, an employee must submit medical bills.

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Medical Allowance vs Medical Reimbursement

Sometimes people use the words Medical Allowance and Medical Reimbursement interchangeably. Although both medical allowance and medical reimbursement are payable to employees against the medical expenses of the employees. The tax implication is different for both.

Medical Allowance is payable on a monthly basis as a part of the salary. However, it is completely taxable irrespective of any submission of expense proof under the head Salary Income. So an employee does not have to submit any medical bills to the employer in order to receive a medical allowance. It is paid to him as a monthly fixed amount which is part of his salary.

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Medical reimbursement is tax-free to a certain extent. As per section 17(2) of the income tax act, reimbursement against medical expenses of Rs. 15,000 in a year is exempt from tax.

From FY 2018-19 onward, Medical Reimbursement has been discontinued. Instead, Standard Deduction up to Rs. 40,000 has been introduced for all salaried employees. Standard Deduction up to Rs. 50,000 is allowed from FY 2019-20 onwards.
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From FY 2018-19 onward, Medical Reimbursement has been discontinued. Instead, Standard Deduction up to Rs. 40,000 has been introduced for all salaried employees. Standard Deduction up to Rs. 50,000 is allowed from FY 2019-20 onwards.

How to claim Medical Reimbursement?

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FAQs

Is the medical allowance taxable?

Medical Allowance is completely taxable. However, Medical reimbursement up to INR 15,000 is not taxable up to FY 2017-18. However, from FY 2018-19 onwards medical reimbursement has been discontinued.

How do I show medical reimbursement in ITR?

Medical Reimbursement is tax-free perquisites under Section 17(2) till INR 15000. However, the employee can incur an amount higher than INR 15,000 on the medical bills. In this case, the excess amount is added to the head salary of the employee at the time of filing ITR on Income Tax Portal.

What is covered under medical reimbursement?

Eligible medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners.

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