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Medical Allowance - What is it & How to Claim it

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April 11, 2023


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What is Medical Allowance?

Medical Allowance is a set sum of money that a company contributes to an employee's base pay to cover medical expenses. Whether or not the employee files the medical invoices to support the expense, they will still receive this allowance each month.

How is Medical Allowance taxed?

Fixed medical allowance remains taxable for any employee even though receiving treatment for illnesses involves costs. This set compensation is taxable monthly under the heading "Income from other sources." Central government pensioners in India, who live in the CGHS area are allowed to receive a fixed payment of 500 INR, which is also taxable.

Healthcare reimbursement is exempt from taxation up to Rs. 15,000, even if the money was paid before the cost was incurred. The exemption from paying for medical expenditures ought to be given. If an employee receives a payment instead of repayment for medical services received overseas, it will be regarded as a portion of the employee's taxable wage. On the other hand, a fixed medical allowance is not covered by the exemption policy, so it is a taxed sum. Therefore, it is often advised that the workers choose medical compensation over submitting a fixed medical allowance.

How to claim your Medical Allowance?

Workers must provide the following records to their employers to receive medical benefits:

  • Medical expenses: Workers should maintain a log of all medical costs paid throughout the year. The worker or a member of their household should be named on the invoices.
  • Medical certification: Workers ought to get an official medical record from the medical professional or medical facility in which they or members of their household got treatment. The certificate must include the patient's name, the date of medical care, the type of disease, and the cost of the medical care.
  • Claim form: Typically, employers give workers a claim form to complete and send along with their medical expenses and medical certification.

The employer will handle the request for reimbursement and transfer the money following the company's policy once the worker provides all the necessary documentation.

How can you enjoy benefits from your Salary Account?

It is suggested that you reimburse your medical expenses instead of receiving a fixed amount monthly. But in case you receive a fixed medical allowance, it would be deposited in your salary account along with your pay. Many institutions offer their own set of rewards and benefits for salary account users.

Fi, and its RBI-licensed partner Federal Bank, provides a salary account with many benefits. For starters, you get 10% of your salary as Fi-Coins — every month as well as 5,000 redeemable Fi-Coins as a joining bonus.

Other perks include a free VISA Platinum debit card with zero forex charges, priority customer service & more. And lastly, Fi will also help you manage/grow your money with features like Connected Accounts, Analyser, Goal-based saving, SIPs & automatic payments.

Frequently Asked Questions

1. Is medical allowance part of the salary?

Yes, it is part of the salary. Medical allowance is money that an employee receives each month in addition to his pay and that is included in the taxable amount.

2. What is a medical allowance with an example?

An employer may provide their workers with a medical allowance to help with their medical expenditures. This benefit, which is usually part of the employee's compensation package, can be used to pay for medical expenditures like doctor visits, hospital stays, and prescriptions.

Example: Consider that you are employed by a business that offers a medical pay of INR 20,000 annually. You spend INR 15,000 on medical costs for your care during the year and INR 25,000 on your spouse's care. You can ask your company to reimburse you for your medical expenditures by providing them with your medical invoices and certificates.

You are entitled to INR 40,000 (INR 15,000 for your medical care + INR 25,000 for your partner's) as compensation from your workplace if your company's insurance covers 100% of the medical costs spent. However, if the insurance only reimburses 80% of the costs, you only get INR 32,000 (INR 40,000 * 80%) in compensation.

3. What is the maximum limit of medical allowance?

The maximum sum that an employee may request an allowance for is INR 15,000.

4. Who can claim medical allowance?

Employees who receive a medical allowance from their company as part of their pay package may claim it in India. However, based on the employer's policy, the precise requirements for receiving a medical allowance may change. To learn about the precise requirements for receiving the compensation, employees should consult their company's medical allowance policy.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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