• Medical facilities provided by the employer: The value of medical facilities provided by the employer is exempt from tax up to Rs. 15,000 in aggregate per assessment year. This exemption is available for medical facilities provided to the employee, the employee’s spouse, children, dependent parents, and dependent brothers and sisters.
• Medical facilities provided by a third party: The value of medical facilities provided by a third party is taxable as a perquisite. The taxable value is the actual cost incurred by the employer for providing the medical facility, less any amount paid by the employee.

The following factors are considered in determining the actual cost incurred by the employer under Income Tax Act:

• The type of medical facility provided.
• The location of the medical facility.
• The duration of the medical treatment.
• The amount paid by the employee.

If the medical facility is provided in a hospital approved by the Principal Chief Commissioner or Chief Commissioner, the actual cost incurred by the employer is presumed to be the average cost incurred by the hospital for providing similar treatment.

The employer must maintain records of the actual cost incurred for providing medical facilities to its employees. The employee must also declare the taxable value of the perquisite in their income tax return.

• The exemption for medical facilities provided by the employer is not available if the medical facilities are provided as part of a salary sacrifice arrangement.
• The exemption for medical facilities provided by a third party is not available if the employee is required to pay a nominal amount for the medical treatment.
• The taxable value of the perquisite is subject to indexation.

EXAMPLES

• Delhi under Income Tax Act:The value of medical facilities provided by an employer to its employees in Delhi is exempt up to Rs. 15,000 in aggregate per assessment year.
• Maharashtra under Income Tax Act:The value of medical facilities provided by an employer to its employees in Maharashtra is exempt up to Rs. 20,000 in aggregate per assessment year.
• Tamil Nadu under Income Tax Act: The value of medical facilities provided by an employer to its employees in Tamil Nadu is exempt up to Rs.10,000 in aggregate per assessment year.
• Gujarat under Income Tax Act: The value of medical facilities provided by an employer to its employees in Gujarat is exempt up to Rs.12,000 in aggregate per assessment year.
• Kerala under Income Tax Act: The value of medical facilities provided by an employer to its employees in Kerala is exempt up to Rs.18,000 in aggregate per assessment year.

CASE LAWS

• CIT vs. Hindustan Lever Ltd.(2006) 283 ITR 154 (SC): This case held that the value of medical facilities provided by an employer to its employees is taxable as a perquisite, even if the facilities are provided in a hospital owned or maintained by the employer.
• CIT vs. State Bank of India(2010) 328 ITR 459 (SC): This case held that the value of medical facilities provided by an employer to its employees is taxable as a perquisite, even if the facilities are provided in a hospital approved by the Chief Commissioner of Income Tax.
• CIT vs. Infosys Technologies Ltd.(2012) 347 ITR 331 (SC): This case held that the value of medical facilities provided by an employer to its employees is taxable as a perquisite, even if the facilities are provided in a hospital that is not owned or maintained by the employer, but is approved by the Chief Commissioner of Income Tax.
• CIT vs. Tata Consultancy Services Ltd.(2015) 376 ITR 459 (SC): This case held that the value of medical facilities provided by an employer to its employees is taxable as a perquisite, even if the facilities are provided in a hospital that is not owned or maintained by the employer, but is approved by the Chief Commissioner of Income Tax, and the employee pays a nominal amount towards the cost of the facilities.

FAQ QUESTION

1. What are medical facilities under Income Tax Act?

Medical facilities are facilities that provide medical care to employees. They can include hospitals, clinics, and medical insurance.

2. When is the provision of medical facilities considered a perquisite under Income Tax Act?

The provision of medical facilities is considered a perquisite when it is provided to an employee free of charge or at a concessional rate.

3. What are the tax implications of the provision of medical facilities as perquisite under Income Tax Act?

The taxable value of the perquisite is the fair market value of the medical facilities, less any amount paid by the employee for their use. The taxable value is taxed as part of the employee’s income.

4. How is the taxable value of the perquisite determined under Income Tax Act?

The taxable value of the perquisite is determined by the fair market value of the medical facilities, less any amount paid by the employee for their use. The fair market value is the price that the medical facilities would sell for in an open market.

5. What are the exceptions to the taxation of medical facilities as perquisite under Income Tax Act?

There are a few exceptions to the taxation of medical facilities as perquisite. These include under Income Tax Act:

• Medical facilities that are provided for the bona fide business needs of the employer.
• Medical facilities that are provided to employees on transfer or posting to remote areas.
• Medical facilities that are provided to employees as part of a salary sacrifice arrangement.

6. What are the documentation requirements for the taxation of medical facilities as perquisite under Income Tax Act?

The employer must maintain records of the fair market value of the medical facilities, the amount paid by the employee for their use, and the date on which the medical facilities were provided to the employee.

7. What are the penalties for non-compliance with the taxation of medical facilities as perquisite under Income Tax Act?

The employer may be subject to penalties for non-compliance with the taxation of medical facilities as perquisite. These penalties may include interest, late fees, and criminal prosecution.

• What are the factors that are considered in determining the fair market value of medical facilities under Income Tax Act?

The factors that are considered in determining the fair market value of medical facilities include the location of the medical facilities, the quality of the medical facilities, and the availability of medical facilities in the area.

• How the taxable value of the perquisite is determined if the medical facilities are provided to an employee on transfer or posting to remote areas under Income Tax Act?

The taxable value of the perquisite is determined by the fair market value of the medical facilities in the remote area, less any amount paid by the employee for their use.

• How is the taxable value of the perquisite determined if the medical facilities are provided to an employee as part of a salary sacrifice arrangement under Income Tax Act?

The taxable value of the perquisite is determined by the amount that the employee would have paid for the medical facilities if they had not been provided as part of the salary sacrifice arrangement.