Every organization, whether small or large, has to face many challenges related to their core business. In such a situation, any operational complexity can divert the focus and precious resources.

Dealing With Medical Reimbursements

Most of the large corporations give a fixed allowance to the employees on a monthly basis irrespective of whether they submit the bills against the expenditure or not.  But, such allowances are not categorized as an allowance that bears tax exemption. It means the employees had to pay full tax on it, so there is no medical allowance tax exemption.

Giving Employees The Advantage Of Tax Exemption

To provide employees the benefit of the tax exemptions, most Indian companies offer the benefit of medical reimbursements. In it, a part of the employee’s salary equivalent to the bill amount becomes non-taxable. Your employees can claim a tax benefit for up to INR 15,000 medical expenses under medical reimbursement.

Rules For Reimbursement

As per clause (b) of Section 17(2) of the IT Act, 1961, no tax is levied on the medical reimbursement up to INR 15,000, if the employee submits all bills to his or her employer. If the bills supporting the medical reimbursement are not provided on time by the employee, the amount INR 15,000 becomes taxable. The reimbursement covers not just the employees but their families as well including spouse, children (dependent or independent, single or married), parents, and dependent siblings of the employee. These reimbursements are non-taxable, if the treatment of an employee or his family member is undertaken in any of the hospitals that are maintained by the employer or managed by Government (Central or State). It also includes any hospital that may be approved by the Chief Commissioner of Income Tax.

Issues The Employer May Have To Face In Case Of Paper-Based Reimbursements

The employer may have to deal with tons of paper bills, and it’ll make their operations inefficient as they may require a dedicated person for the same.

From the Perspective of Smaller Organizations

Most of the smaller organizations have limited resources, and they have to focus on their core business. As they grow and the number of employees increases, it may require a dedicated person to take care of the issues, which means increased cost of operations. Further, as discussed earlier, most of the smaller firms already have various compliances to deal with, and they surely don’t want to get penalized for any TDS related issues. So is there any system or process that can allow them to care for the employees without jeopardizing the budgets & simultaneously caring for the compliances?

A Digital Solution Like Optima Simplifies the Process

Such a solution is beneficial to organizations in many ways. Let’s take a look into the nitty gritty of the solution.

No Paper 

As the solution is electronic, you can manage medical bill reimbursements digitally.


Employers save costs on storage of the paper bill copies that are submitted by the employees.


It saves a lot of time and resources.


The organization can access digital reports on medical reimbursement.

Bill Verification

Optima Experts do all the verifications pertaining to the medical reimbursement.

Safe Audits

Storage of all digital reimbursement records for seven years. 


In the end, a digital solution like this can take care of medical allowance tax exemption process completely and allow firms to focus more on their core business.