Exemption on Medical Insurance
Premium
Purpose
This component calculates the tax exemptions against Medical Insurance premiums.
You can provide Medical Insurance to your employees in the following ways:
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· By specifying an annual amount for Medical Insurance and making payments against claims submitted by the employee.
· By giving the employees a certain amount as Medical Insurance allowance on a monthly or a periodic basis.
Integration
Whenever an employee submits a bill for medical premium as proof, you must create an Exemptions infotype (0582), MDA subtype record for the employee.
You can disburse the payments for Medical Insurance through the Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014), Additional Payments infotype (0015) or Additional Off-Cycle Payments infotype (0267).
The To read infotype 0582 payroll function (P0582) reads the Exemptions infotype (0582), MDA subtype record and populates the details in internal table EXM. Payroll functions WPBP, P0014 and P0015 read the Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014) and Additional Payments infotype (0015), respectively and populates the internal table. Medical reimbursement payroll function (INMED) reads EXM and the internal table and generates the Medical Insurance wage type (/3M2).
Payroll functions WPBP, P0014 and P0015 read the Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014) and Additional Payments infotype (0015), respectively for Medical Insurance premium payments and populates the Input Table with Medical Insurance and Medical Reimbursement to be treated as Medical Insurance wage types. Medical reimbursement payroll function (INMED) reads the Exemptions infotype (0582), MDA subtype record, the Input Table and the Cumulative Results Table, and generates the Medical Insurance Exemption wage type (/3M2).
Features
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· Reimbursement of premiums, paid by the employee, for the Medical Insurance policy on the health of the employee or his or her family members is tax exempt.
· The employee must submit the Medical Insurance premium bills as proof to avail of the tax exemption. You must enter the bill date, exemption amount and select the dependents for whom the bills are submitted, in the Exemptions infotype (0582), MDA subtype. You must select the indicator for Medical Insurance Exemption in this infotype record.
· Exemption against Medical Insurance is the lower of:
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a. Total Medical Insurance payments made for the financial year through Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014), Additional Payments infotype (0015) or Additional Off-Cycle Payments infotype (0267).
b. Total amount of the Medical Insurance premium bills submitted as proof and entered in the Exemptions infotype (0582), MDA subtype.
· The reimbursement of Medical Insurance premium does not form part of the Gross Taxable Income of the employee. If the employee has claimed, as Medical Insurance premium, an amount that is greater than the bills submitted as proof, the excess amount is added to the Gross Taxable Income.
You have been provided with an option, whereby, you can ignore the entries in the Exemptions infotype (0582), MDA subtype, by sending a parameter, X, to the Medical reimbursement payroll function (INMED). In such a case, exemption on Medical Insurance is the total Medical Insurance payments made for the financial year.
· An employee may be allowed to claim Medical Insurance premium against the Medical Reimbursement limit set by the employer. But for the purpose of taxation, this amount is treated as Medical Insurance premium. To give this benefit to an employee, you must
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a. Select the indicator for Medical Insurance Exemption in the Exemptions infotype (0582), MDA subtype record in which you enter the details of this bill.
b. Enter the constant, 1, as the Assignment Number in the Additional Payments infotype (0015) record, through which you make the payment for this claim.
Example
An employee is eligible to a Medical Insurance allowance of Rs.20,000 and he or she submits Medical Insurance premium bills as proof of Rs.16,000 for the financial year. In this case, Rs.4,000 is added to the Gross Taxable Income of the employee.
See also:
Exemptions infotype (0582) MDA subtype