Circular No. 336, dated 6-4-1982

[Omitted by Circular No. 603, Dated 6-6-1991]

What this is

Circular No. 336, dated 6-4-1982 was issued by the Central Board of Direct Taxes on 6 April 1982. Its subject is [Omitted by Circular No. 603, Dated 6-6-1991].

What it does

Reinstates the 1955 position on medical perquisites. Circular No. 33 dated 1st August 1955 had said that the provision of ordinary medical facilities free of charge to an employee or his family, and reimbursement of such expenses after they are incurred, are not to be included in the employee's total income. A departmental priced publication in the Taxpayer Information Series had since said something different, that reimbursement for directors and managers above one month's salary in a year with a ceiling of Rs. 5,000 a year, or three months' salary up to Rs. 15,000 for every three years of service, would be taxed as a perquisite, and Income-tax Officers were reopening assessments on the strength of that passage. With the approval of the Central Government, the Board clarifies that such medical facilities or reimbursement are not to be included in total income so long as the amount does not exceed one month's salary in the financial year, salary here taking in dearness allowance where paid but no other allowance or perquisite, and that this applies to all classes of employees, managers and directors included.

Why it was issued

Representations said that officers were disregarding the Board's 1955 instruction and reopening employees' assessments on the basis of a statement in a departmental publication, and asked the Board to reiterate the earlier instruction.

Who it reaches

Employees receiving medical facilities or reimbursement from employers
Directors and managers, expressly brought within the concession
Employers valuing perquisites for deduction under section 192
Assessing Officers reopening assessments on the publication's view

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

[OMITTED BY CIRCULAR NO. 603, DATED 6-6-1991]

Valuation of reimbursement of medical expenses/medical facilities by the employer--Instruction regarding.

Circular Number: 336, dated 6-4-1982 [F. No.200/108/77-ITAI]

Text:

To

All Commissioners of Income-tax.

Sir,

Subject : Valuation of reimbursement of medical expenses/medical facilities by the employer-Instruction regarding.

Circular No. 33, dated 1-8-1955, stated, inter alia, that the following amenities are not to be included in the total income of an employee, as a part of the perquisites provided by the employer:

(i) Provision of ordinary medical facilities to the employee or his family free of charge;

(ii) Reimbursement of such medical expenses to the employee after they are incurred.

2. Subsequently at page 50 of the priced publication "Filing of Income-tax Return by Non-Corporate, Non-Business Taxpayers" as a part of the Taxpayer Information Series issued by the DI (Publication and Public Relations), it was, inter alia, stated:

"Reimbursement of medical expenditure incurred in the case of directors/managers, etc., for self and family, in excess of one month's salary in a year with a ceiling of Rs. 5,000 per annum or three months' salary with a maximum of Rs.15,000 for a period every three years of service, will be treated as perquisite and taxed as such."

3. The Board have received representations that in disregard of the Board's earlier instructions of 1955, ITOs are reopening the assessments of employees on the basis of the statement made in the priced publication referred to above. A request has been made that the Board should reiterate its earlier instruction of 1955.

4. After carefully considering the matter, the following clarification is issued with the approval of the Central Government.

5. The provision of ordinary medical facilities made by an employer to an employee or his family free of charge or reimbursement of such medical expenses to the employee after they are incurred by him, is not to be included in the total income of the employee provided that such amount does not in any financial year exceed one month's salary of the employee. "Salary" for this purpose will include dearness allowance, where paid, but will not include any other allowance/perquisite. This will apply to all classes of employees, including managers/directors.

6. These instructions may be brought to the notice of all officers working in your charge.

Yours faithfully,

(Sd.) V.B. Srinivasan,

Secretary, Central Board of Direct Taxes.

What to watch

The heading on the text records that this circular was omitted by Circular No. 603 dated 6th June 1991.
The one month's salary test was itself replaced by a Rs. 5,000 annual limit from assessment year 1984-85 by the later circular in this chain.
Salary for this purpose includes dearness allowance where paid and nothing else, so the ceiling has to be worked out on that narrow base.
The concession is for ordinary medical facilities and reimbursement of expenses actually incurred; it does not deal with treatment abroad.

Where you meet it

In an old salary assessment or reopening where medical reimbursement was added as a perquisite, and when reading the chain of circulars on medical perquisites.

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.