PROSPERR.IO

The basic objective behind Flexi Benefit Plan is to restructure CTC in such a way that employees can benefit from the elements of CTC that are tax exempt under the provisions of the Income-tax Act. Such benefits may arise from the exemptions, deductions and tax free perquisites. 

In this article, we'll discuss two such elements which can be part of FBP. 

Health Insurance Premium

The following amounts paid or reimbursed by the employer in respect of “Health Insurance” are not considered as taxable perquisite under the proviso to clause (2) of section 17 of the Income-tax Act:-

(1) Any portion of the premium paid by an employer for health insurance of an employee under a scheme framed by –

• the General Insurance Corporation and approved by the Government of India, or 
• any other insurer and approved by the Insurance Regulatory and Development authority (IRDA)  

(2) Any amount reimbursed by the employer in respect of any premium paid by the employee to effect or keep in force health insurance on- 

• his health, or 
• the health of the spouse and children of the employee, and the parents, brothers and sisters of the employee, if anyone of them is wholly or mainly dependent on the employee 

under any health insurance scheme framed by –

• the General Insurance Corporation and approved by the Government of India, or 
• any other insurer & approved by the Insurance Regulatory & Development authority (IRDA)  

Medical expenses

The medical expenditure incurred or reimbursed by the employer are not considered a taxable perquisite as per the proviso of clause (2) of section 17 of the Income-tax Act, if such expenditure have actually been incurred by the employee on-  

• his medical treatment, or 
• medical treatment of the spouse and children of the employee, and the medical treatment of parents, brothers and sisters, if any one of them is wholly or mainly dependent on the employee, 

Subject to condition that such expenditure has been incurred on the medical treatment–

• in a Government Hospital, a hospital of local authority, any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees, such as CGHS approved hospitals;
• in any hospital approved by the Chief Commissioner or the Principal Chief Commissioner if the treatment is in respect of diseases or ailments prescribed in Rule 3(2) of the Income-tax Rules 
• in respect of any illness relating to COVID-19, subject to the fulfillment of specified conditions. 

Conclusion

Many of us incur expenditures on health insurance. If the reimbursement of premium paid for health insurance is made a part of CPC, an employee can save tax on reimbursement of such expenses by the employer. Similarly, each one of us incurs expenses for medical treatment, if such treatment is taken from the specified hospitals and reimbursement for such expenses is made as part of the CPC, the employee can save tax and also remain compliant with tax laws.

With Flexi Benefit Plans, you can get the most out of your employees and make them happier at work. To embark on a journey towards increased in-hand salaries and empowered employees, contact Prosperr.io today!

[Disclaimer- The article is only for educational purposes, covering limited aspects of relevant provisions of the Income-tax Act. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.]