Hi all,

Here in this post i have tried explain the Medical allowance/Reimbursement payment & Exemption process.

First of all we need to understand the terms Medical Allowance, Medical Reimbursement & Medical Insurance and their tax aspects.

Medical Allowance: The medical allowance is part of any employees CTC, defined by employer and most imp. Medical allowance is taxable

Medical Reimbursement: Medical reimbursements are the actual amount that the employer’s gives to an employee when they submit bills for medical treatment availed for the financial year.

Medical reimbursements are exempt from taxes till the limit defined by the IT Act, which is Rs. 15,000

Medical Insurance: Don’t get confused with Medical Insurance, that is completely a different product. So do not compare it with Medical Allowance or Medical Reimbursement. Employee will get separate rebate under section 80D for Medical Insurance.

Process to claim Medical Reimbursement:

Case 1: Some employers provide medical reimbursements to the employees . In this case employee can submit the bills for the medical expenses and claim the benefits. These bills can be submitted quarterly, half-yearly or annually.

Case 2: Many of the employers pay the medical allowance of Rs. 15,000 as a part of the monthly salary. In such cases employees just need to submit the bills to the employers to get rebate upto 15000 per FY.

Example: Employee is getting 1250 rs. per month as allowance as part of his salary. He falls ill and gone under hospital treatment for 5000 rs. So he will submit the treatment bills to employer for rs. 5000 and will get rebate on it.

Total medical allowance = 1250*12 = 15000

Bills = 5000

Taxable amount = 15000-5000 = 10000

Now we will see how this process take place in SAP_

Ultimately there are two parts  PAYMENT & EXEMPTION

 

Payment: You can make the payments for Medical Reimbursement through the IT-0008/0014/0015/0267

Exemption: The MDA subtype of the Exemptions infotype (0582) stores the details of the bills submitted as proofs for medical exemptions.

Integration: Payroll functions WPBP, P0014 and P0015 read the infotype 0008/0014/0015,respectively for Medical Reimbursement/Insurance premium payments and populates the Input Table with the Medical Reimbursement , Medical Insurance and Medical Reimbursement to be treated as Medical Insurance wage types. The Medical Exemption that is brought forward from the previous employer is stored in the Prev Medical Exempt wage type (/4V6) in the Input Table. Medical reimbursement payroll function (INMED) reads the Exemptions infotype (0582), MDA subtype record, the Input Table and the Cumulative Results Table, and generates the Medical Reimbursement Exemption wage type (/3M1) and the Medical Insurance Exemption wage type (/3M2).

The amounts in /3M1 and /3M2 are then added to generate the Total Medical Exemption wage type (/414).

Take an example in which employee is getting Rs. 59610 as Medical Allowance and submitted Medical bills for exemption for Rs. 15000. After running the Payroll system generates /3M1


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So in Annexure to Form-16, you will get Medical Allowance as well as Exemption.


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Configuration:

  1. For Payment we need to create a Wage type by copying it through OH11 and set permissibility in any payment infotype 0008/0014/0015/0267 as per requirement
  2. Add it to total gross amount via Cumulation class 1 and show it in Annexure to Form-16 in Emoluments paid section via Evaluation class 6  
  3. Add the Wage type in table V_T7INT9 and assign the Tax code SMED
  4. Standard wage type /414 will get generated and will be shown in Annexure to Form-16 with heading ” Exm.under proviso to sec.17(2)” via Evaluation class 6

Hope this will help you ! Enjoy!!

Thanks,

Gaurav Sharma

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3 Comments

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  1. ravi keni

    Hi Gaurav,

    Thanks for the above post.

    In my case….The exemptions are being considered only for 11 months i.e April month is skipped.

    No /3M1 and /414 is generated for April month.

    Hence, the annual exemption is reflected as 13750/- and not 15000/-

    Can you please guide.

     

    Thanks,

    RK

     

     

    (0) 

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