Circular No. 376, dated 6-1-1984

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

What this is

Circular No. 376, dated 6-1-1984 was issued by the Central Board of Direct Taxes on 6 January 1984. Its subject is [Omitted by Circular No. 603, Dated 6-6-1991].

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Replaces the medical perquisite limit that Circular No. 336 dated 16th April 1982 had set. Under that earlier circular, the value of ordinary medical facilities provided free by an employer, or reimbursement of medical expenses incurred by the employee, stayed out of the employee's total income so long as it did not exceed one month's salary in the financial year, salary taking in dearness allowance where paid but no other allowance or perquisite, and the concession applied to all classes of employees including managers and directors. On reconsideration the Central Government directs instead that such reimbursement or provision of medical facilities is taxable only to the extent it exceeds Rs. 5,000 a year, with effect from the year 1983-84, that is assessment year 1984-85 onwards.

Why it was issued

Several representations were received against the one month's salary test in Circular No. 336, and the Central Government reconsidered the matter.

Who it reaches

Employees receiving medical reimbursement from employers
Employers valuing medical perquisites for deduction under section 192
Managers and directors, who were within the earlier concession
Assessing Officers computing salary income from assessment year 1984-85

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 perquisites in the form of reimbursement of medical expenses/provision of medical facilities by the employer--Clarification regarding. Circular No. 336 dated 16-4-1982

Circular Number: 376, dated 6-1-1984 [F. No. 200/7/83-IT(AI)]

Text:

Subject : Valuation of perquisites in the form of reimbursement of medical expenses/provision of medical facilities by the employer--Clarification regarding. Circular No. 336 dated 16-4-1982

F.No. 200/108/77-IT(AI) provided the clarification that the value of the provision of ordinary medical facilities 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 the amount does not in any financial year exceed one month salary of the employee. Salary for this purpose was to include Dearness Allowance, where paid but was not to include any other allowance/perquisite. The circular was to apply to all classes of employees, including managers/directors.

2. Several representations have been received against this circular. The Central Government has reconsidered the matter and has directed that the reimbursement of medical expenses to an employee/provision of medical facilities by an employer to an employee will be taxable only in excess of Rs. 5,000 per annum.

3. The above clarification will come into force from the year 1983-84, i.e. assessment year 1984-85 onwards.

(Sd.) V.B. Srinivasan

Director

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 Rs. 5,000 figure runs from assessment year 1984-85; for earlier years the one month's salary test of Circular No. 336 was the rule.
Medical reimbursement was later governed by a proviso to section 17(2) and its own monetary limit, so the concession described here belongs to its own period.
The circular speaks of ordinary medical facilities and reimbursement; it does not address treatment abroad or hospitalisation in specified hospitals.

Where you meet it

In an old salary assessment or an employer's section 201 proceeding where medical reimbursement was not brought to tax, 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.