Income Tax Filing for AY 2024-25 is now open. File early for quicker refunds. Start Now eFile now
What is Medical Facility Under the Income Tax Act?

Medical allowance is a set monthly payment granted to employees of a corporation regardless of whether they present bills to verify the expense or not. Medical reimbursement, however, is a payment paid to workers for particular medical expenses presented by them, subject to entitlement. If employees wish to claim tax advantages, they must submit bills for the corresponding amount under medical reimbursement every month. Medical allowance is not classified as an exemption allowance under the IT Act of 1961. As a result, a medical allowance is a monthly set compensation supplied by an employer that is completely taxed. Employees can claim a tax deduction of up to Rs. 15,000 for medical expenses.

Taxability of Medical Facilities

Before understanding the taxability, it is essential to keep in mind the following points:

  • A fixed medical allowance is always taxed.
  • For the purposes of valuing the prerequisite in relation to medical facilities, "family" means
    1. the individual's spouse and children; and
    2. the individual's parents, brothers and sisters, or any of them, entirely or mostly reliant on the individual.

The taxable value of medical facilities given by an employer to his employee is computed as follows:

Treatment in a hospital maintained by the employer

Medical treatment supplied to an employee or a member of his family at any hospital maintained by the company is not taxable.

Treatment at a hospital run by the government, a local authority, or any other hospital authorised by the government

Treatment at a hospital administered by the government, a local authority, or any other hospital authorised by the government.

Treatment of a condition or disease authorised by the Chief Commissioner in a hospital approved by the Chief Commissioner

Medical care offered to an employee or any of his family members in a hospital approved by the Chief Commissioner for diseases listed in Rule 3A is exempt from taxation.

Employer-paid health insurance premiums

Any portion of the premium paid by an employer to retain his employees or any of his family members' health insurance policy in effect under a programme recognised by the Central Government or IRDA for the purpose of section 36(1)(ib) is not taxable.

Health insurance premiums reimbursed by the employer

Any portion of the premium paid by an employer to retain a health insurance policy in place for his employee or any of his family members under a programme recognised by the Central Government or IRDA for the purposes of section 80D is not taxable.

Other healthcare expenses

Any sum spent by the employer in respect of an employee's medical treatment or treatment of any of his family members (excluding treatment referred to in (a) and (b)) is not taxable up to Rs 15000/-.

Medical treatment outside India
  • (a) Medical treatment for the employee or any of his family members.
  • (b) Travel and stay overseas for the employee or any of his family members and one attendant, to the extent approved by RBI. The exemption is applicable only if the employee's gross total income, before adding this expenditure, does not exceed Rs 2,00,000/-.

Benefits of Medical Facility Taxability Calculator?

Here are the benefits of using such a calculator:

  • Accurate Tax Calculations: These calculators help ensure accurate calculations of tax liability related to medical benefits, preventing underpayment or overpayment of taxes.
  • Cost Savings: By understanding the tax implications, individuals and employers can make informed decisions to optimize their medical benefit packages and reduce overall costs.
  • Compliance: Helps individuals and organizations comply with tax laws and regulations related to medical benefits, reducing the risk of legal and financial penalties.
  • Financial Planning: Allows individuals to plan their finances effectively by accounting for tax liabilities associated with medical benefits, which can impact their take-home pay.
  • Transparency: Provides transparency regarding the taxability of various medical benefits, such as health insurance, reimbursements, and other health-related perks.
  • Employee Satisfaction: Employers can use this tool to design competitive and tax-efficient benefit packages that contribute to employee satisfaction and retention.
  • Decision-Making: Helps organizations make informed decisions about the structure of their employee benefits programs and cost-sharing arrangements.
  • Reduction of Errors: Minimizes the risk of tax-related errors, which can lead to costly corrections and penalties.
  • Tax Planning: Enables tax planning and optimization by considering the tax implications of various medical benefit options.
  • Time Savings: Simplifies and expedites the process of determining tax liabilities, saving time for both individuals and HR departments.
What is the Difference between Medical Reimbursement and Medical Allowance?

Many people confuse the ‘terms medical reimbursement' and 'medical allowance,' believing they imply the same thing. However, according to the Income Tax Act of 1961, the phrases contain several tax treatments. While medical allowance is entirely taxable, medical reimbursement is exempt from tax up to Rs. 15,000. The exemption for medical expenditures should be allowed even if the payment came before the spending. If an employee receives an allowance instead of reimbursement for medical treatment overseas, the allowance will be deemed a taxable component of the employee's compensation.

What is Medical Facility Calculator?

A medical facility calculator helps you calculate the medical facilities an employee has received from an employer in India or outside India.

How Tax2win's Medical Facility Taxability Calculator Works?

Children's Education and Hostel Allowance can be claimed only by individuals who have their children in a hostel or are studying. It is allowed up to a specified amount for a maximum of two children

Medical Expenditure paid or reimbursed by employer 1,00,000
Exempt up to 15,000
Taxable perquisites 85,000
Medical treatment in india
Eligibility Criteria for Using Medical Facility Calculator

Any employee who has received or is receiving medical allowances from the employer is eligible to use the medical facility calculator.



What is the Maximum Permissible Limit for Medical Facility Reimbursement?

Medical reimbursement can be claimed up to a maximum of Rs.15,000 per year.


Under what circumstances is medical reimbursement tax-free?

Medical reimbursement will be tax-free if the hospital is run by the employer, local authorities, the state government, or the federal government, or if it is approved by the government or the Chief Commissioner of Income Tax.


How do I compute my medical allowance deduction?

The highest amount that may be claimed as a medical allowance deduction is Rs.15,000 per year. As a result, if you have incurred medical charges of, say, Rs.38,000 over the course of a financial year, you must submit your medical invoices and receive a tax advantage of Rs.15,000. Your tax deduction is restricted to Rs.15,000 regardless of how much you spend on medical treatments. However, Arun Jaitley, India's Finance Minister, proposed in Budget 2018 that a standard deduction of Rs.40,000 be given for both medical reimbursement and transportation allowance, with both being combined.

What We Do

Get A personal eCA

Get your personal eCA to do tax filing for you. And it is personal, convenient & fast with maximum refund calculated for you.

Book Now

File it yourself

You can file your ITR on your own. It's Easy, quick & free when you file with Tax2win on your own.

File ITR Now

File Revised Return

Made mistake while filing ITR? We can help you correct it.

Revise ITR Now

Plan Tax & File ITR

A little planning can go a long way in saving your hard earned money. Don't just file your tax return, plan them & get maximum refunds.

Start Now

NRI Taxes & ITR Filing

Status of NRI seems to be cool but it brings with itself a lot of taxation..

Start Now