Valuation of Medical Facilities
1. Arranged by Employer
- Medical facility provided to employee or his family member in a hospital, clinic, dispensary or nursing home maintained by employer is fully exempt.
- Medical treatment taken from any doctor for himself or his family members is exempt upto Rs 15,000. Note: Taxable only in case of specified employees in the year in which it is provided.
2. Arranged by Employee
It is treated as an obligation: Actual expenditure reimbursed by the employer is taxable. Exemption upto Rs 15,000 is available if medical expenditure is reimbursed for employee or his family members.
Note: Taxable in both the cases of employees whether specified employee or non-specified employee in the year in which it is reimbursed.
3. Other points -
-Medical facility in Govt. hospital: Payments or reimbursement made by employer in connection with the medical treatment of employee or his family members in a hospital, clinic, dispensary or nursing home maintained by Govt. or a local authority or a hospital approved by the Govt. is fully exempt.
- Medical treatment of prescribed disease: Payments or reimbursement made by employer in connection with the medical treatment of employee or his family members for treatment of prescribed disease in an approved hospital, clinic, dispensary or nursing home is fully exempt.
Note : Do remember exemption is available only if medical treatment is provided to employee or his family.
4. Meaning of family: It means spouse, child (dependent or non-dependent) and only dependent father, mother, brother and sister.
P1: (A) Amount of expenditure incurred by the employer for medical treatment of employee and his members of household.
| Members of household | Case 1 | Case 2 | Case 3 |
1. | X and Mrs. X | 16,000 | 4,000 | 11,000 |
2. | Married son | 500 | 2,500 | 4,000 |
3. | Married daughter | 800 | 330 | 1,200 |
4. | Father (not dependent) | 1,000 | 650 | 2,400 |
5. | Dependent brother | 600 | 4,200 | 3,500 |
6. | Married sister | 900 | 1,000 | 500 |
7. | Dependent grandmother | 2,100 | 6,500 | 1,200 |
P2: X & his family members are treated in the hospital maintained by the employer. Calculate the value of medical facility which is taxable in the hands of Mr. X.
X, Mrs X and their minor child Rs 7,000 Major Son of Mr. X (self-dependent) | Rs3,200 |
Parents of Mr. X (Dependent) | 5,000 |
Parents of Mrs. X (Dependent on Mr. X) | 11,000 |
Brother of Mr. X (Dependent on Mr. X) | 7,300 |
Sister of Mr. X (Not dependent on Mr. X) | 18,000 |
Besides, Mr. X took the reimbursements from employer for the payment made to private medical practioner as follows :
Treatment of Mrs. X and their children | Rs 3,000 |
Treatment of mother of Mr. X | 4,800 |
Treatment of Mrs. X’s father | 2,700 |
Ans: 31,700.
Valuation of Motar Car Facilities
There is a golden rule of perquisite that any expenses incurred by employer for the benefit of employee becomes taxable. Now let us see what are those expenses which can be incurred by employer in relation to the car.
A. Facility for use of car. It is computed @ 10% p.a. of the cost of the car if the car is owned by the employer. Where car is taken on hire, then actual hire charges becomes taxable. (Let us call this use.) Car can be a big car or small car.
Big car : If engine capacity exceeds 1600 cc or 1.6 litres or 16 h.p.
Small Car : If engine capacity is upto 1600 cc or 1.6 litres or 16 h.p.
B. Regular expenses of the car. It means expenses like petrol, repairs and maintenance, insurance of the car and parking. and
C. Remuneration of chauffeur if provided.
Tax Treatment
Cases | Car is owned or hired by | Regular expenses borne by | Car is used wholly for personal purpose | Car is used for mixed purpose (Both official and personal) | |
A | Employer | Employer | Use+ regular | upto 1600 cc | ? 1,800 p.m. taxable |
17(2)(iii) |
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| expenses + salary of driver - recovery is taxable. ABC - R = T | Exceeds 1600cc | ? 2,400 p.m. taxable |
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| Driver | ? 900 p.m. taxable | |
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| Recovery is not applicable. | ||
B | Employer | Employee | Use+ salary of driver | Upto 1600cc | ? 600 p.m. taxable |
17(2)(iii) |
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| - recovery is taxable. | Exceeds 1600cc | ? 900 p.m. taxable |
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| AC - R = T | Driver | ? 900 p.m. taxable |
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| Recovery is not applicable. | |
C | Employee | Employer | regular expenses + | Upto 1600cc | ? 1,800 p.m. exempt. |
17(2)(iv) |
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| salary of driver - recovery is taxable. BC - R = T | Exceeds 1600cc | ? 2,400 p.m. exempt. |
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| Driver | ? 900 p.m. exempt. | |
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| Recovery is applicable. |
| Case 1 | Case 2 |
Cubic capacity of car | 1,800 cc | 1,600 cc |
Cost of the car | 6,00,000 | 3,50,000 |
Expenditure on maintenance and running of the car | 1,20,000 | 75,000 |
Salary of driver | 48,000 | 60,000 |
Amount charged by the employer | 8,000 | Nil |
| Car is owned by | Regular expenses borne by | Car is used wholly for personal purpose | Car is used for mixed purpose |
A | Employer | Employer | 60,000 + 1,20,000 + 48,000 - 8,000 = 2,20,000 | 28,800 + 10,800 = 39,600 |
B | Employer | Employee | 60,000 + 48,000 - 8,000 = 1,00,000 | 10,800 + 10,800 = 21,600 |
C | Employee | Employer | 1,20,000 + 48,000 - 8,000 = 1,60,000 | 1,20,000 - 28,800 + 48,000 - 10,800 - 8,000 = 1,20,400 |
A | Employer | Employer | 1,70,000 | 32,400 |
B | Employer | Employee | 95,000 | 18,000 |
C | Employee | Employer | 1,35,000 | 1,02,600 |
1. Travelling facility for official purposes is exempt.
2. Conveyance (cab) facility provided to an employee to cover the journey between office and residence is fully exempt.
3. Insurance
(a) Employer’s contribution towards staff group insurance scheme is fully exempt.
(b) Payment of annual premium by employer on personal accident policy effected by him in respect of his employee is fully exempt.
(c) mediclaim insurance premium paid by an employer in relation to an employee is fully exempt.
Category C Perquisites : FULLY EXEMPTED PERQUISITES | |||
1. | Staff group insurance. | 11. | HHF - official purpose exempt. |
2. | Use of laptop, computer and telephone is exempt. | 12. | Meal upto Rs 50 per meal is exempt. |
3. | Gifts in kind upto Rs 5,000 is exempt. | 13. | Meal in remote area is exempt. |
4. | Sale of SIT to its employees is exempt. | 14. | Hotel accommodation - transfer and upto 15 days. |
5. | The other asset which is 10 year old is exempt. | 15. | Education facility upto Rs 1,000 per month per child. |
6. | Loan facility upto Rs 20,000 is exempt. | 16. | Training of EE’s |
7. | Loan given for treatment of specified disease is exempt. | 17. | S 10(16). Scholarship. |
8. | Credit card / club if given for official purpose is exempt. | 18. | Medical facilities upto Rs 15,000. |
9. | Health club - for all employees | 19y | Medical facility in Own / Govt. hospital. |
10. | Corporate membership - initial fees is exempt | 20. | Medical treatment of specified disease in an approved hospital |
1. Provident fund means making provision for the future. It is an instrument of saving in the hands of employee where both the employer and employee contributes. The total contributed amount is invested in Bank, Post office or Govt. securities to earn interest.
2. The Govt. passed a law Provident Fund Act, 1925. Under this Act two funds were set up.
STATUTORY PROVIDENT FUND : It is applicable to Central Govt. employees or State Govt. employees or employees working in Universities.
PUBLIC PROVIDENT FUND : This fund is for general public. It is applicable to all individuals whether employee or not. In this provident fund employer does not play any role. PPF A/c can be opened at post office or at any branch of State Bank of India and designated branches of private banks.
3. For private employees Govt. passed another law Provident Fund Act, 1952. Under this employer opens a provident fund account in the name of employee with the provident fund commissioner. This account is known as unrecognised provident fund (URPF).
Where such unrecognised provident fund (RPF) is recognised by Commissioner of Income Tax it becomes recognised provident fund. Recognition is given as per fourth schedule of the Income Tax Act.
| Particulars | SPF | PPF | URPF | RPF |
1. | Employer’s contribution towards PF. | Not Taxable | Does not contribute | Not Taxable | Excess of 12% of sAs is taxable |
2. | Employee’s contribution towards PF. Whether deduction u/s 80C available? | Available | Available | Not Available | Available |
3. | Interest credited to PF. | Not Taxable | Not Taxable | Not Taxable | Excess of 9.5% is taxable |
4. | Lump sum withdrawal from PF. | Exempted u/s 10(11) | Exempted u/s 10(11) | Taxable | Exempted u/s 10(12) |
SAS = 25,000 + 5,000 = 30,000 |
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Employer’s contribution towards RPF (13% of 30,000) | 3,900 |
Less: 12% of SAS (12% of 30,000) | 3.600 |
Employer’s contribution in excess of 12% of SAS towards RPF | 300 |
Let the outstanding amount of PF on which interest is credited = x |
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10.5% of x = 10,500 therefore by solving we get x = 1,00,000. |
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Taxable amount of interest in excess of 9.5% towards RPF (1% of 1,00,000) | 1,000 |
Alternatively | |
Total interest ............................. x Interest rate in excess of 9.5% Total rate of interest | 10,500 -------- x 1% = 1,000 10.5% |
P2: Mr. Taxcrazy who retires on 31-3-2017 furnishes following information:
Salary after deduction of employee’s contribution towards provident fund of ₹ 20,000 | 76,000 |
Dearness allowance (100% forms part of salary). | 24,000 |
Interest @ 10% towards provident fund. | 15% of salary |
Interest @ 10% towards provident fund. | 20,000 |
On 31-3-2017 following amounts are withdrawn from provident fund.
1. Withdrawal of employer’s contribution RS 1,00,000.
2. Interest on employer’s contribution RS 50,000.
3. Withdrawal of employee’s contribution RS 1,00,000.
4. Interest on employee’s contribution RS 50,000.
You are required to compute Total Income for the AY 2017-18 if type of provident fund is (a) Statutory provident fund (b) recognised provident fund (c) unrecognised provident fund.
Ans: (a) 1,00,000 (b) 1,04,600 (c) 3,20,000.
Solution
| SPF | RPF | URPF |
Basic Salary | 96,000 | 96,000 | 96,000 |
Dearness Allowance | 24,000 | 24,000 | 24,000 |
Employer’s contribution towards provident fund | not taxable | 3,600 | not taxable |
Interest @ 10% towards provident fund | not taxable | 1,000 | not taxable |
Lump sum withdrawal from provident fund |
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• Employer S contribution | Exempt | Exempt | 1,00,000 |
• Interest on Employer S contribution | Exempt | Exempt | 50,000 |
Income from Salary | 1,20,000 | 1,24,600 | 2,70,000 |
Income from Other Sources |
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• Interest on employee S contribution | exempt | exempt | 50,000 |
Gross Total Income | 1,20,000 | 1,24,600 | 3,20,000 |
Less: Deduction u/s 80C (Employee’s contribution towards PF) | (20.000) | (20,000) | not available |
Total Income | 1,00,000 | 1,04,600 | 3,20,000 |
P3: Compute ‘Total Income’ of Mr. X from the following informations.
(i) Net salary received after deduction of : 1,50,000
(a) His own contribution in recognised provident fund 20,000
(b) Income Taxv 10,000
(ii) Employer’s contribution to recognised provident fund 23,600
(iii) His other income 1,00,000
Ans : 1,80,000 + 2,000 = 1,82,000 + 1,00,000 = 2,82,000 – 20,000 = 2,62,000.
(i) Employer’s contribution in excess of 12% of salary towards recognised provident fund.
(ii) Interest credited to the recognised provident fund in excess of 9.5%.
(iii) The transferred balance in a recognised provident fund from unrecognised provident fund.
(iv) The contribution made by employer in the previous year to the account of an employee under a new pension scheme referred to in section 80CCD. (New pension Scheme set up by Central Govt.).
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1. What is the valuation of medical facilities for taxation purposes? |
2. How are cars valued for taxation? |
3. What is the valuation process for transportation facilities for taxation? |
4. How are provident facilities valued for taxation purposes? |
5. Can the valuation of medical, car, transport, and provident facilities impact tax liabilities? |
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