Introduction
Section 17(2) of the Income Tax Act provides tax exemptions for medical facilities provided by employers to employees. Under Proviso (ii)(b) of this section, hospitals can obtain certification from the Chief Commissioner of Income Tax (CCIT) to qualify as an approved medical facility. Once certified, medical treatment provided by such hospitals to employees is considered a tax-exempt perquisite, benefiting both the employer and the employees.
This guidance note provides a comprehensive overview of the benefits, eligibility, application procedure, compliance requirements, and conditions for obtaining certification under Section 17(2) Proviso (ii)(b).
Benefits of Certification under Section 17(2) Proviso (ii)(b):
For Employees:
Tax-Free Medical Treatment – Employees receiving treatment at certified hospitals enjoy complete tax exemption on medical reimbursements from their employer.
Access to Quality Healthcare – Certification ensures that hospitals maintain infrastructure and hygiene standards, leading to better healthcare services.
For Employers:
Seamless Reimbursement Process – Certified hospitals allow employers to reimburse medical expenses without additional tax liability.
Employee Welfare & Retention – Providing tax-free medical benefits improves employee satisfaction and retention.
For Hospitals:
Increased Patient Footfall – Employers prefer sending employees to certified hospitals, leading to an increase in patients and revenue.
Enhanced Credibility & Recognition – Certification by the Income Tax Department enhances the hospital’s reputation and credibility.
Compliance with Standards – Hospitals adhering to required norms improve healthcare quality and operational efficiency.
Procedure for Obtaining Certification under Section 17(2) Proviso (ii)(b):
Eligibility Check
The hospital must comply with Rule 3(1) of the Income Tax Rules regarding infrastructure, medical equipment, and staffing.
It should be a registered medical institution with the relevant local authority.
Submission of Application
The hospital must submit an application to the Chief Commissioner of Income Tax (CCIT) in the prescribed format.
The application must include documentary evidence of compliance with required conditions.
Document Submission
The following documents must be submitted:
Hospital Registration Certificate from local health authorities.
Proof of Infrastructure Compliance – Building compliance certificates, hygiene certifications, and operational approvals.
List of Medical Equipment & Staff – A complete list of medical instruments, ICU facilities, and details of qualified medical staff.
Treatment Facilities for Specified Diseases – Documents proving that the hospital provides treatment for diseases listed in Rule 3(2).
Inspection & Verification
The Chief Commissioner of Income Tax (CCIT) may conduct a site inspection to verify compliance with the required norms.
Any deficiencies noted during the inspection must be rectified before approval.
Issuance of Certification
Upon successful verification, the CCIT grants certification, allowing the hospital to provide tax-exempt medical treatment under Section 17(2), Proviso (ii)(b).
Conditions for Certification under Section 17(2) Proviso (ii)(b):
As per Rule 3(1) of the Income Tax Rules, the following conditions must be met by the hospital:
Infrastructure & Hygiene Requirements:
Building Compliance – The hospital building must comply with applicable municipal regulations.
Hygiene & Ventilation – Rooms must be well-lit, ventilated, and maintained with high hygiene standards.
Minimum Bed Requirement – The hospital must have at least ten iron spring beds.
Operation Theatre – A fully equipped operation theatre with at least 180 square feet of floor space and a separate sterilization room.
Labour Room – If providing maternity services, a labour room of at least 180 square feet is mandatory.
Infectious Patient Isolation – Proper arrangements for isolating patients with infectious diseases.
Safe Drinking Water & Storage Facilities – Availability of potable water and separate storage for medicines and food.
Medical Equipment & Facilities:
Essential Equipment:
Sterilization Units – High-pressure sterilizer and instrument sterilizer.
Oxygen Cylinders & Attachments – Adequate oxygen supply for emergency use.
Surgical Instruments & Pathological Laboratory – Fully equipped laboratory for diagnostic tests.
Electrocardiogram (ECG) Machine – Essential for heart disease monitoring.
Backup Power Supply – Stand-by generator for uninterrupted medical services.
Staffing & Doctor Availability:
Doctor Availability:
At least one qualified doctor must be available 24/7 for every 20 beds.
If ICU facilities are provided, at least two dedicated ICU doctors must be available round-the-clock.
Nursing Staff Ratio:
At least one nurse per 5 beds, available 24/7.
ICU must have one nurse per ICU bed, with a minimum of four nurses per four ICU beds.
Patient Health Records:
Detailed health records for each patient, including name, address, diagnosis, and treatment details.
Specified Diseases Covered for Tax-Exempt Medical Benefits:
Hospitals seeking certification must provide treatment for the specified diseases listed in Rule 3(2), including:
Cancer
Tuberculosis (TB)
Acquired Immunodeficiency Syndrome (AIDS)
Major Organ & System Diseases Requiring Surgery:
Heart, blood, bone marrow, respiratory system, nervous system, urinary system, liver, gall bladder, endocrine glands, etc.
Skeletal & Fracture Treatments:
Bone fractures and dislocations requiring orthopedic intervention.
Gynecological & Obstetric Ailments:
Cesarean sections, laparoscopic interventions, and related treatments.
Severe & Prolonged Medical Treatments:
Conditions requiring hospitalization for three continuous days.
Mental disorders, drug addiction treatments, severe allergic reactions, etc.
Hospitals must maintain proper documentation of treatment history to ensure compliance with tax exemption rules.
Conclusion
Obtaining certification under Section 17(2) Proviso (ii)(b) is a strategic step for hospitals, offering tax advantages and enhancing their credibility. Hospitals must diligently meet all infrastructure, staffing, and operational standards to qualify. Adhering to stringent compliance norms, maintaining accurate patient records, and ensuring regular audits will facilitate approval and continued certification. By fulfilling these obligations, hospitals can effectively leverage tax benefits while providing high-quality healthcare services to employees
