Fin623

Question: 01- Mr. Ali is an accounts officer in a company. His basic salary is Rs. 88,000 per monthfor the tax year 2016. He has been provided with rent-free furnished accommodation in a big city byhis employer. He has been given a car by the company and it pays some monthly running expenses aswell.

You are required to discuss the tax treatment of following cases:

a. Received medical allowance of Rs. 10,000 per month. Calculate the amount chargeable to taxfor the tax year 2016. (show complete working) (4 Marks)

1st of all:

Medical allowance received by an employee not exceeding ten per cent of the basic salary of theemployee.

if exceed then consider tax able:

basic salary 88000

medical allowance 10000 = 10% = 8800 which is exceed: 1200

so, taxable amount of Rs: basic salary+on exceed medical allowance

Total income tax amount=46,564

Calculate the amount chargeable to tax for the tax year 2016
88000 X 12 = 1,056,000
1200 X 12 = 14, 400
1,070,400 is a tax chargeable amount
Tax on chargeable amount
Income Tax of Rs: 46,540

a) If Medical Facility or reimbursement of actual Medicalexpenses is provided:

in accordance with terms of employment: The amountprovided is fully exempt if NTN of medical practitioner and employer'sattestation are available.

Not in accordance with terms of employment: The amount provided is fullytaxable

b) Medical Allowance provided: Tax Treatment is exempt upto 10% of Basic Salary

c) Medical allowance is provided in addition to medical facility or reimbursement inaccordance with the terms: Tax Treatment is Medical allowance fully taxable andFacility / reimbursement is Fully Exempt if NTN of medical practitioner and employer'sattestation are available.

d) Medical allowance is provided in addition to medical facility or reimbursement but
NOT in accordance with the terms: Tax Treatment is Medical allowance is exempt upto
10 % of Basic Salary and Facility / reimbursement is Fully taxable.

Medical Allowance -with out medicalfacility]Taxable (Exempt up10% of Basic salary)

Medical Allowance - withReimbursement ]Taxable (with No exemption)

Medical benefit / Reimbursement (inaccordance with the terms ofemployment )Exempt if

NTN of the hospital / clinic is disclosed

The employer certifies and attests the bills

b)....medical treatment provided by the employer under employment agreement
make the decision;

Reimbursement of medical charges orhospitalization charges or both is exempted fromtax if:

it is provided for under the terms ofemployer's employment agreement. The employeeprovides NTN of the hospital or clinic and medicalor hospital bills are also certified and attested bythe employer.

c)

it mean that with out employment contract bothmedical charges orhospitalization charges are not exempted.