Medical Allowance
Medical allowance is a fixed monthly amount for medical expenses. The ₹15,000/year reimbursement exemption was removed in 2018, so it is now fully taxable.
What is Medical Allowance?
Medical allowance and medical reimbursement are two different things, and people confuse them. Medical allowance is a fixed sum paid every month, no bills needed, fully taxable today. Medical reimbursement was an old scheme where employees submitted bills up to ₹15,000 a year and got tax-free reimbursement. Budget 2018 killed that exemption and merged it into the standard deduction. Some firms still show "medical allowance" on the salary slip but it is just taxable salary. What stays tax-free is employer-paid health insurance premium and treatment in employer-run hospitals. Section 80D also lets employees claim premium paid out of pocket, separate from anything the employer does.
How Medical Allowance is used
Treat medical allowance as plain taxable salary in payroll. For real medical benefits, offer group health insurance, that gives a perk without tax issues.
Medical Allowance FAQs
Is medical allowance tax-free?
No. Both the ₹15K reimbursement and any fixed allowance are now taxable.
What about employer-paid health insurance?
Premium paid by employer for group mediclaim is not a taxable perquisite up to actual cost.
Can I claim 80D for my own health insurance?
Yes, up to ₹25K self/family and ₹50K for senior citizen parents, only in old regime.