We would like to know about the reimbursement option. If we opt for reimbursement will it affect IT for employees and organization?

Sometimes employees are entitled to many reimbursements such as medical treatment, telephone bill etc. One would not get the money in salary but funds will be passed against submission of such bills. So these are not included in the monthly payslip.

You can avail the tax exemption benefit for the components up to the limit provided by the government.

If the employer added the medical reimbursement component in your CTC, Lets see what will happen in the following example

Medical expenses that you get as reimbursement from your employer company are completely tax-free, provided you submit your medical expenses bills to your employer as proof. The amount of tax benefit is restricted to the amount for which bills have been submitted.

E.g. Sameer spent Rs. 20,000 in FY 2014-15 as medical expenses on various medicines, check-ups and vaccinations for his kids.

He received reimbursement of Rs. 15,000 from his employer against the bills he submitted. This entire amount of Rs. 15,000 is tax-free for Sameer. Shekhar, on the other hand, spent Rs. 10,000 on medical expenses and submitted these bills to his employer. Although he received the entire Rs. 15,000 as medical expenses reimbursement, an amount of Rs. 5,000 (15,000 – 10,000) was taxable as per slab rates applicable to him.

This is because the tax-free amount of reimbursement is restricted to an amount for which genuine bills are submitted.

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