Whether TDS is deducted from hospitalization bills reimbursed by employer

[Guest]

Dear Sir,

The husband of a lady met with an accident and was comatose for three months due to severe head injury, after which he died. The wife of this person is an employee of State Bank of India. The medical bill was reimbursed by the employer (SBI) to the employee (lady in question). The question is, whether the bill amount will attract TDS under Indian Tax laws.

[CASeetharaman KC]

Any medical expenses when paid is considered as part of taxable salary. If the employee submits proof of having incurred the expenditure towards medical treatment, the sum spent towards medical treatment or ₹ 15,000/-, whichever is less, is excluded from salary. The exclusion is on the basis of the proviso (v) to section 17(2) of the Income Tax Act. If the amount spent towards medical treatment is in excess of ₹ 15,000/- the excess (beyond ₹ 15,000) is not considered as a deduction. Effectively, the excess amount spent continues to remain taxable. If no proof of having incurred the expenditure towards the medical treatment is produced by the employee, the entire sum paid is considered as a perquisite. TDS under section 192 of the Act has to be deducted accordingly. In this case presuming that proof has been submitted any amount in excess of ₹ 15000 would be subject to TDS provided of course that this limit of ₹ 15000 has not been already exhausted earlier during the Financial Year

[Ganeshan Kalyani]

TDS is deductible under 192.

[DR.MARIAPPAN GOVINDARAJAN]

The reply given by CA Seetharaman is absolutely correct.

AI Summary

Taxability of employer reimbursed medical expenses: exemption up to statutory limit, excess treated as perquisite and subject to TDS. Employer payments for an employee's medical treatment are treated as salary; when the employee submits proof, reimbursement up to the statutory medical exclusion is excluded from salary, but any excess is taxable as a perquisite and subject to TDS. If no proof is produced, the whole reimbursement is treated as a perquisite. The exclusion must be applied taking into account prior utilisation in the fiscal year before calculating TDS obligations.