'Reimburse medical expenses up to Rs 50,000'
While industry is apprehensive of a possible rollback of the stimulus package, there could be some cheering news in the forthcoming Union Budget for salaried employees. The government is likely to increase the exemption limit for reimbursement against medical and travel expenses. A hike in the exemption limit for gratuity payment from the present Rs 3.5 lakh is also being considered.
At present, reimbursement of medical expenses up to Rs 15,000 is tax-free. Any reimbursement above that is counted as income and taxed. Similarly, transport allowance is tax-free only up Rs 800 a month. These exemption limits were fixed 10 to 15 years back. The income-tax department is now considering an adequate increase to at least ensure that inflation in the years since is neutralised. In the last 10 years or so, the average price of commodities has almost doubled.
Tax experts feel the present limit for reimbursement of medical expenses should be increased to Rs 50,000. Government sources refused to give any revised figure but said the matter is under consideration.
Senior tax consultant Subhash Lakhotia showed another anomaly in the medical treatment provision. He said that if an employer incurs expenses on travel and stay abroad of the employee or any member of his family for medical treatment, then such expenditure is not treated as a perquisite. But this facility will be available only if the gross total income of the employee is below Rs 2 lakh. Due to this provision, the exemption in respect of medical treatment abroad is lost and cannot be used by any employee. Most employees who are entitled to this facility have income of more than Rs 2 lakh. To make this provision effective, experts feel, the government should change it to enable more employees to avail of it.
Similarly, in 1997, the government had introduced a provision to allow an exemption of Rs 800 per month for a salaried employee on account of transport allowance granted by the employer. This transport allowance is given to meet the expenses for commuting between the employee’s residence and office. But, as the cost of transport has increased, the limit of Rs 800 has become inadequate, said Lakhotia. Therefore, the government is learnt to be considering an increase in the limit.