Exemption limit on medical and travel costs likely to go up

NEW DELHI: While industry is apprehensive of a possible rollback of the stimulus package, there could be some cheering news in the forthcoming Union Budget for salaried employees. The government is likely to increase the exemption limit for reimbursement against medical and travel expenses. A hike in the exemption limit for gratuity payment from the present Rs 3.5 lakh is also being considered.

At present, reimbursement of medical expenses up to Rs 15,000 is tax-free . Any reimbursement above that is counted as income and taxed. Similarly, transport allowance is tax-free only up Rs 800 a month. These exemption limits were fixed 10 to 15 years back. The income-tax department is now considering an adequate increase to at least ensure that inflation in the years since is neutralised . In the last 10 years or so, the average price of commodities has almost doubled.

Senior tax consultant Subhash Lakhotia pointed out that the exemption limit on medical reimbursement was introduced from April 1, 1999. In the last 10 years, because of general inflation and the high cost of medical treatment and medicines, the limit of Rs 15,000 has become grossly inadequate.

Executive director of tax consultancy firm KPMG Vikas Vasal too said the revision of the limit is overdue . ‘‘ It should be made meaningful,’’ he said.

Easing Tax Sting

Rs 15,000: Exemption limit for reimbursement of medical expenses. Tax experts say it should be made Rs 50,000

Rs 800/mth: Cap on allowance for commuting between home and office. ‘Meaningful hike’ likely

Rs 3.50 lakh: Tax-free gratuity payment. Anything above this is taxed for pvt employees, though tax-free for govt employees. Amount may be raised to Rs 10 lakh

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