Wednesday, April 3, 2013

Medical Allowance - Tax Treatment


According to Clause 139 of part 1 (Exemption from total income) of 2nd Schedule of Income Tax Ordinance, 2001



a) If  Medical Facility or reimbursement of actual Medical expenses is provided:
  • in accordance with terms of employment: The amount provided is fully exempt if NTN of medical practitioner and employer's attestation are available.
  • Not in accordance with terms of employment: The amount provided is fully taxable
b) Medical Allowance provided: Tax Treatment is exempt upto 10% of Basic Salary

c) Medical allowance is provided in addition to medical facility or reimbursement in accordance with the terms: Tax Treatment is Medical allowance fully taxable and Facility / reimbursement is Fully Exempt if NTN of medical practitioner and employer's attestation are available.

d) Medical allowance is provided in addition to medical facility or reimbursement but NOT in accordance with the terms: Tax Treatment is Medical allowance is exempt upto 10 % of Basic Salary and Facility / reimbursement is Fully taxable.

Ref: Income Tax Ordinance, 2001

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  8. I would like to confirm if I am earning 50k basic salary so I can have medical exemption Rs.5000 but my company is offering medical reimbursement upto 24k on receipts. now can I get exemption on remaining amount (60k-24k)=36K? Also I am insured for hospitalization for which company would pay some premium so will it be counted medical allowance?

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