Section 80D: Medical Allowance and Reimbursements for Medical

Allowances refer to the fixed amount that is added to the basic salary of an employee to fulfil certain requirements. One such requirement is healthcare which is fulfilled by medical allowance. This article will briefly discuss the meaning of medical allowance, deduction, calculation and related details.

What is  Medical Allowance?

Medical allowance refers to the fixed amount an employer pays the employee to meet their healthcare needs. The modern world has witnessed a change in daily lifestyle, and diseases have become prevalent. Therefore, to support their human resources, employers pay a certain amount of medical allowance for their welfare.

Medical allowances are often applicable not only for the employees but also for their dependent family members. Employees get medical allowance included in their basic salary regardless of illness. This amount was fully taxable, but now salaried individuals can make deductions under the standard deduction section of the income tax filing. 

Reimbursements for Medical Expenditure

Reimbursements for healthcare expenditures is the compensation that an employer offers to an employee based on the documents and proof of medical expenses. The reimbursements may include fees of doctor visits, pre and post surgical diagnosis and tests and related healthcare expenses. 

What is the Difference Between Medical Allowance and Medical Reimbursement?

Medical allowance is the fixed amount that is paid along with the basic salary irrespective of whether an employee has claimed it. Whereas medical reimbursements mean the amount that is compensated by an employer after an employee submits all the medical expense bills. After verifying these bills the employer pays back to the employee as per the company policy.

Procedure of Claiming Medical Allowance Deduction

It is better to choose medical reimbursement than medical allowance as medical reimbursements are tax-free till a certain limit. To claim such deduction, employees must submit medical proofs of their treatment under section 80D.

Medical Allowance for Pensioners

Pensioners or any individual taxpayer can get standard deductions on medical allowance. Each year pensioners can claim up to Rs. 40,000 as tax deduction. This limit is Rs. 50,000 for senior citizens. However, there are certain conditions to meet before availing this deduction. These are:

  • If a pensioner gets more than one pension, a deduction can be claimed only for one pension.
  • A pensioner can get a medical allowance either from a civilian or a military facility.

Medical Reimbursements Calculation

To understand the calculation, you can take the following example.

Suppose Mr. A had a medical emergency and was admitted to a hospital for treatment. The hospital bill came to Rs. 30,000 approximately. Now, as soon as he recovers, he can come to his employer and present documents of his hospitalisation to his employer. Although if he gets the full reimbursement, only the amount of Rs. 15,000 will be tax-exempt, and the rest will be taxable.

Why do Companies Give Medical Allowance and Reimbursements?

Due to lifestyle changes, the rate of illness is rapidly growing. However, employees need to be fit for better work productivity, and that is why employers are into giving medical allowance to ensure their employees’ sound health.

Final Words

This article has covered all the necessary details about medical allowance and medical reimbursements. You will now have a clear idea on tax deduction and on how to calculate taxation amount on medical allowance. Thus, you can claim tax deduction on medical reimbursements at the time of ITR filing by producing proper medical documents.

Frequently Asked Questions

What will happen if you don’t submit bills on time to take medical reimbursements?

As per the rules, Rs. 15,000 is tax exempted from the total medical expenditure, and employees can claim this by following proper method. Employees need to submit all their medical proofs and documents in the 3 months post the date of treatment completion.

What are the types of medical benefits that an employee can get?

The types of medical benefits that an employee can get are as follows:

Fixed Medical Allowance: This is a fixed amount that an employer pays, which is fully taxable. Employees get this allowance irrespective of whether they want to spend it on medical purposes or not.
Mediclaim or Health Insurance Policies: Employers can offer different mediclaim policies for their employees.
Medical Reimbursements: Medical reimbursements are the compensations that employers provide to their employees after checking all documents of medical expenditures which the employee has already paid for the treatment.

What are the conditions for claiming tax benefits for medical reimbursements?

Certain conditions for claiming tax benefits for medical reimbursements are as follows:
Employees can not claim tax benefits of the previous year
Employees must present all necessary medical documents
They need to claim reimbursement within a limited period, as per the IT rules.

Can anyone claim a deduction for medical insurance under medical reimbursements?

Employees can not claim any deduction for medical insurance under medical reimbursements. This is because medical insurance is not considered as an expense for any treatment or medical cause. Therefore, this does not fall under the medical reimbursement category.

Animesh Gupta

Animesh Gupta is a Chartered Accountant by profession and a NISM certified Mutual Fund Expert. He has over 4+ years of experience working in the Financial Services Industry. In his role at Wintwealth, he is part of the Credit and Risk team and evaluates the risk of the bonds available on Wintwealth's platform.

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