Rs15,000 cap on medical bills will stay, rules HC

Government employees claiming medical bills of private hospitals exceeding Rs15,000 will be liable to pay tax on the excess amount, the Bombay High Court ruled on Monday.

Justice HL Gokhale and Justice VR Kingaonkar dismissed a bunch of petitions challenging a provision in the Income-Tax (I-T) Act which states that medical bills exceeding Rs15,000 from private hospitals not approved by the employer are part of employees’ taxable income.

As per the IT Act, an expense exceeding Rs15,000 incurred in a private hospital not approved by the employer will be liable to taxation. No such limit is prescribed for reimbursement of expenses incurred in a government-run hospital or a hospital approved by an employer or in cases of specific illnesses and the entire amount claimed is tax-free.

Petitions challenging the Constitutional validity of the law were filed by bank employees and unions including All India State Bank Officer's Federation, State Bank of India Officers Association, All India Reserve Bank Employees Association and Reserve Bank of India Employees Association.

The petitioners had challenged the provision stating that it was discriminatory. They argued that medical reimbursements should be treated as part of the fundamental right to life under Article 21 of the Constitution. The employees claimed that reimbursement of medical expenditure couldn't be considered as a perquisite or a perk as the amount went to the hospital and not to an employee.
Also, in case of an emergency an injured person cannot always be taken to a government-run or approved hospital.

The judges held that taxation was a policy of the government and it was right in classifying employees who seek treatment in government hospitals and those in private hospitals. "It is for the legislature to decide which categories to be taxed and which categories to be excluded,” the judges said. Perquisites, the court said, would include all such benefits, amenities, payments which an assessee gets from his employer and medical reimbursement would qualify as a perk.