Q. If medical allowance is given to an employee, despite the fact that it is not provided in his terms of employment, will it be taxable or exempt?
A. Medical allowance will be exmept upto 10% of basic salary in that case, too, but subject to the following condition:
- free medical treatment or hospitalization or reimbursement of medical or hospitalization charges are not provided in the terms of employment.
Exemption of medical allowance is not dependant upon 'terms of employment'. Thus, medical allowance is exmept whether or not it is given as per terms of employment, subject to the condition noted above.
As against this, the benefit of free medical treament, hospitalization, or reimbursment provided by employer is fully exempt if (i) provided in terms of employment (ii) NTN of hospital/clinic is given, (iii) employer certifies and attest the medical bills.
Thus, condition of 'as per terms of employment' is relevant for exemption of free medical treament, hospitalization, or reimbursment and not for medical allowance.
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