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CA Intermediate · Taxation · Salaries

Mr. Arun Nair, a resident employee of a private company in Kochi, receives a salary of Rs 40,000 per month. His employer also reimburses Rs 6,000 per month towards his own medical treatment bills in a private clinic, supported by bills. Assuming no other facts, how is the medical reimbursement treated for tax year 2026-27?

The reimbursement of Rs 72,000 is taxable in full as a perquisite. Reimbursement of treatment in a private clinic is not within the specified exempt categories, and the old Rs 15,000 medical reimbursement exemption is no longer available, so the whole annual amount is added to salary.

  1. AFully exempt because it is supported by bills
  2. BTaxable as a perquisite in full, Rs 72,000 for the yearCorrect
  3. CExempt up to Rs 15,000 for the year and the balance taxable
  4. DTaxable only if the employee's salary exceeds Rs 50,000 per month

Explanation

Reimbursement of medical expenditure at a private clinic is not covered by the old Rs 15,000 exemption, which stands omitted. Treatment in a private clinic does not fall in the limited exempted categories such as employer-maintained hospitals or prescribed hospitals for specified diseases. So Rs 6,000 x 12 = Rs 72,000 is taxable as a perquisite. The Rs 15,000 option is wrong because that limit no longer exists.

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