Medical expenses form one of the biggest spends for individuals and families in India today. The current day workstyle and general lifestyle had led to an increase spends on health and well being. The government identifies this expense and thus wants to provide employees with benefits on their medical expenditures.
The Income Tax Act allows tax benefits on key items like food vouchers and medical spends. Medical reimbursement comes under Section 80D. Employers reimburse a part of medical and other health related expenses incurred by their employees. There is tax exemption on up to Rs. 15,000 p.a on Medical reimbursements paid by the employer.
Conditions under which an employee can claim Medical expenses?
a) Should be spent on healthcare and medical treatment;
b) The amount is spent by the individual, for self and treatment of family members like spouse, and children. Medical bills of parents and siblings of an employee who are wholly dependent on the employee can also be submitted;
c) The amount should have been spent during the given financial year;
d) Maximum of Rs. 15,000 is reimbursed by the employer during the given financial year.
Key points on Medical Reimbursements:
i) The entire Rs. 15,000 is taxable if no medical bills are produced by the employee to support reimbursement claims.
ii) If the employee’s medical expense in a year, with supporting bills, was Rs.11,000, they will get a tax exemption of Rs.11,000 only out of the Rs.15,000 allowed. The remaining Rs. 4,000 is fully taxed for that employee.
iii) Do not confuse Medical Reimbursement with medical allowance which is a fixed component of an employee salary that is fully taxable.
One of the key issues faced for implementing Medical Reimbursement is the cumbersome manual processes for the employers to collect, verify and store these medical bills. Today, all of these steps is predominantly done using manual processes. The Employees spend money on medical expenses, collect paper bills of these spends and then bring back these bills to the employer for submission.
These ways of employee benefits needs to change as it is inefficient, and time consuming. What should otherwise be seen as a benefit is mostly something which both the employer and employee dreads today.
Welcome to Medical Reimbursement 2.0
With Paysack, we make this process of medical reimbursement digital. The Paysack Reimbursement Wallet + Card for employees along with the Paysack dashboard for Employer ensure Medical Reimbursement is completely digital.
An employee will never have to bring back a paper bill to office, ever.
Co-Founder & CEO
You might also be interested to read about employee tax saving using the Paysack Food Wallet + Card