A retired PSU employee inquired about the tax treatment of medical reimbursements, Section 80D deductions for unreimbursed expenses, and standard deductions on employer-funded superannuation pensions. Expert advice clarified that reimbursements are not taxable income, the unclaimed portion qualifies for Section 80D, and pension income is taxable under salaries, allowing standard deductions.
Retired PSU employee wanted to know whether medical reimbursements from his former employer are taxable, whether unreimbursed medical expenses qualify for the Section 80D deduction, and if he can claim the standard deduction on his employer-funded superannuation pension. Today’s Ask Wallet Wise explains the tax treatment of employer-sponsored medical reimbursements and the rules governing the standard deduction for pension income.
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I am a 78-year-old retired PSU employee. My employer normally bears all the costs of medical treatment provided in their own hospital. If the facility is not available at their hospital, the case is referred outside, and the expenses incurred are reimbursed by the PSU. I got a reimbursement of Rs 40,000 from my bill of Rs 70,000 last year.
I also received a reimbursement of Rs 25,000 for lenses and spectacles. Are all the reimbursements required to be included in my income, and can the balance of Rs 30,000 be claimed under Section 80D? Can I claim the standard deduction on the pension from the Life Insurance Corporation for an annuity purchased by my employer under a superannuation scheme?
Expert’s Advice: Reimbursement is made for expenses incurred that cannot be treated as the recipient’s income. So you need not include the amount of reimbursement received from your employer in your income. Since this is not income at all, you are also not required to disclose the same in your ITR.
As per the provisions of Section 80D, a senior citizen can claim a deduction in respect of medical expenses incurred by him if he does not have any health insurance policy to cover his hospitalisation expenses. So, for Rs 30,000 not reimbursed by your employer, you can claim this under Section 80D, provided you do not have any health insurance policy, provided the payment was not made in cash. I presume that the facility of treatment in your employer’s hospital is not under any insurance scheme.
Pension received from your ex-employer, as well as which is received due to your employment, is taxed under the head salaries, like pension received from EPFO under the EPS scheme or for annuity bought by the employer. Since the annuity was bought by your employer, this amounts to pension, which is taxable under the head salaries, and therefore you can claim standard deduction of up to Rs. 50,000 under the old tax regime and up to Rs. 75,000 under the new tax regime.
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