Exemption on Medical
Reimbursement
Purpose
This component calculates the tax exemptions against Medical Reimbursements.
You can give Medical Reimbursements to your employees in the following ways:
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· By specifying an annual (normally, but not necessarily) amount for Medical Reimbursement and making payments against claims submitted by the employee.
· By giving the employee a certain amount as medical allowance on a monthly or a periodic basis.
For further information on Medical Reimbursements, see the Claims section.
Integration
Whenever an employee submits the bills for medical exemption as proof, you must create an Exemptions infotype (0582), MDA subtype record for the employee. You can create a record for each bill submitted by the employee or you can create a record by cumulating all the bills, submitted as proof for medical exemption.
You can make the payments for Medical Reimbursement through the Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014), Additional Payments infotype (0015) or Additional Off-Cycle Payments infotype (0267).
Payroll functions WPBP, P0014, P0015 and P0267 read the Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014), Additional Payments infotype (0015) and Additional Off-Cycle Payments infotype (0267), respectively for Medical Reimbursements and populates the Input Table with Medical Reimbursement and Medical Reimbursement to be treated as Medical Insurance wage types. The system stores the Medical Exemption that is brought forward from the previous employer in the Input Table against the Previous Employment Medical Exemption wage type (/4V6). 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 Reimbursement Exemption wage type (/3M1).
Features
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· Medical Reimbursement is tax exempt up to a maximum limit as per the Income Tax Act. To configure this maximum limit go to the IMG under Payroll India ® Tax ® tax Liability on reimbursements, Allowances and Perks ®Assign Tax Code limits to Wage types.
· The employee has to submit the medical bills as proofs to avail of the tax exemption. The details of the declaration are populated in the Exemptions infotype (0582), MDA subtype.
· Exemption against Medical Reimbursement is the minimum of:
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a. Total Medical Reimbursement 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 medical bills submitted as proofs and entered in the Exemptions infotype (0582), MDA subtype.
c. Maximum limit of the exemption against Medical Reimbursements as configured in point 1, above.
You must populate the Exemptions infotype (0582), MDA subtype with the details of the medical bills submitted as proofs to avail of the medical exemption on Medical Reimbursements.
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 Reimbursement is the lesser of a and c, above.
· An employee may be allowed to claim Medical Insurance premium against the Medical Reimbursement limit set by the employer. Hence, for the purpose of claim, this Medical Insurance premium amount is treated as Medical Reimbursement. 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 proof.
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
The tax exemption limit for Medical Reimbursement is Rs.15,000. An employee is eligible to a medical allowance of Rs.20,000 and he or she submits proofs of Rs.10,000 for the financial year. In this case, the employee gets a tax exemption of Rs.10,000, which is the minimum of the above three amounts.
See also:
Medical Reimbursement Definition
Exemptions infotype (0582) MDA subtype