What is a Medical Facility Under the Income Tax Act?

Under the Income Tax Act, a medical facility refers to the benefits given by employers to cover employees medical expenses. There are two key terms to understand : one is medical allowance and other is medical reimbursement.

• Medical Allowance: It is a fixed monthly amount paid to employees by their employer, regardless of whether the employee provides medical bills. Since it does not require any proof of medical expenses, it is fully taxable and does not qualify for any tax exemption.
• Medical Reimbursement: This is the amount the employer pays to cover particular medical expenses when employees submit valid medical bills. Unlike medical allowance, medical reimbursement can be used to claim tax benefits. Up to Rs. 15,000 can be claimed as a tax deduction for medical expenses provided they submit the necessary bills.

In short, while medical allowance is taxable, medical reimbursement offers tax benefits when proper documentation is provided. This distinction helps employees maximize their tax savings on medical expenses under the Income Tax Act of 1961. 

What is a Medical Facility Calculator?

A medical facility calculator is a tool that helps you to calculate the value of medical benefits provided by an employer in India or abroad. It considers various factors such as reimbursements, hospital treatments and insurance premiums. 

Tax Rules for Medical Facilities

When it comes to medical benefits provided by an employer, it is essential to understand the taxability of these facilities. Here are a few points to keep in mind:

1. Fixed medical allowance is always taxable. 
2. For tax purposes, “Family” includes an individual's spouse, children, and any dependent parents, brothers and sisters fully reliant on the employee. 

The taxability of medical facilities given by an employer is determined as follows: 

Treatment in a Hospital Owned by the Employer

If the medical treatment is given to the employee of their family at a hospital maintained by the employer it is not taxable. 

Treatment at a Government or Approved Hospital

Medical treatment at a hospital run by the government, a local authority or a hospital authorized by the government is also not taxable. 

Treatment for Specific Diseases

If an employee or their family member receives treatment for a specific condition or disease at a hospital approved by the Chief Commissioner, the expenses are exempt from tax. 

Employer Paid Health insurance Premiums

If an employer pays any part of the health insurance premium to keep an employee’s or their family’s policy active under a plan recognized by the Central Government or IRDA for section 36(1)(ib), it is not taxable. 

Health Insurance Premiums Reimbursed by the Employer

If the employer reimburses any part of the health insurance or their family under a plan recognized by the Central Government or IRDA (for section 80D) it is also not taxable. 

Other Healthcare Expenses

If an employer spends money on an employee's medical treatment or their family member (excluding specific treatments mentioned earlier), it is not taxable up to Rs.15000. This helps cover basic healthcare costs without adding to the employee’s taxable income. 

Medical Treatment Outside India

1.  If an employee or their family member receives medical treatment abroad, the expense is exempt from tax. 
2.  Travel and accommodation costs for the employee, their family members and one attendant are also tax exempt but only if the expenses are approved by the RBI. The exemption applies if the employee's gross total income before including these expenses is less than Rs. 20,000. 

These provisions allow employees to access medical care abroad without facing extra tax burdens, provided they meet the income limit and approvals. 

What are the Benefits of Medical Facility Taxability Calculator?

Here are the benefits of using a Medical Facility Taxability Calculator:

Accurate Tax Calculations:  The calculator gives precise tax calculations for medical benefits and avoids mistakes that lead to underpayment and overpaying or overpaying of taxes. 

Tax Compliance: It helps users comply with tax laws regarding medical benefits and also lowers the risk of penalties or legal issues.  

Cost Savings: By understanding the tax rules, both individuals and employers can optimize their medical benefit benefits and reduce overall costs.

Better Financial Planning: Individuals can plan their finances more effectively with the help of this calculator. 

Transparency: It also clarifies the taxability of various medical perks like health insurance and reimbursements. 

Error Reduction: The calculator minimizes the risk of mistakes that could result in costly corrections.

How Does Chartered ONE’s Medical Facility Calculator Works?

Chartered ONE’s Medical Facility Calculator helps users calculate the tax liability on medical benefits. Children’s Education and Hostel Allowance can be claimed only if the employee's children are studying or staying in a hostel. The allowance is available for up to two children and can be claimed for up to a specified limit. This tool ensures that users can accurately calculate and claim eligible allowances to ensure compliance with tax regulations. 

Using our Medical Facility Taxability Calculator is easy and helps you estimate your tax deductions in just a few steps. Here’s how to use Chartered ONE’s calculator: 

Access the Calculator: Go to Chartered One, click on Tools, then select Calculators and choose Medical Facility Calculator. 

Enter your details: Provide information such as financial year, where you have availed medical facility, treatment availed at, and other required information. 

Calculate: Once all details are entered, you will get an instant view of your tax deductions.