There are various components available when it comes to the salary structure. Salaried individuals find it difficult to understand the insurance part and hence interchange the terms medical allowance and medical reimbursement as both the benefits are provided by the employer to its employees.
Employees should understand the difference between the two along with tax implication before submitting the bills.
Medical Allowance forms a part of your salary structure and is independent of whether you avail medical treatment or not. There is no need to submit any medical bills to claim the amount.
Medical allowance is fully taxable in the hands of an employee and will be added to your income and gets taxed as per the prevailing tax slab of the individual.
Any medical expenses incurred by the employee or his family members will be reimbursed with no upper limit, while, tax exemption will be applicable to the extent of Rs 15,000 per financial year.
In case of medical reimbursement, employees are required to submit the medical bills to the employer to claim for the reimbursement.
If an employee fails to submit required bills before the end of the financial year, the monthly accrued part will be taxed at 30 per cent.
Say for example, if the employer reimburses your medical bill of Rs 30,000, only maximum of Rs 15,000 will be exempt from tax, remaining Rs 15,000 will be added to your income and taxed as per tax slabs.
In case of medical reimbursement, family is defined as employee, spouse and children and dependent siblings and parents. Employees can seek reimbursement for bills such as medicines, doctor consultation fee, hospital checkups, diagnostic tests.
Note that medical reimbursement limit of Rs 15,000 is over and above the tax exemption provided under Section 80(D) of the Income Tax Act, for availing of medical insurance.