In a major relief to employees, the Government has said they would no longer have to pay income tax on money drawn from welfare funds for annual medical check-ups.

The Central Board of Direct Taxes ( CBDT ) has issued a notification in this regard.

As per the notification, no income tax will be levied "to meet the cost of annual medical tests or medical check-ups of the member, his spouse and dependent children" if money is drawn from the welfare fund to meet the expenses.

Earlier, only cash benefits to a member of the welfare fund on superannuation, illness (including spouse or dependent children), or towards education of dependent children were exempted from income tax.

Exemption from taxation is granted under section 10 of the Income Tax Act. The latest exemption has been given under a clause that deals with income received on behalf of a fund established for the welfare of employees or their dependants.

Also, earlier this year, the government had withdrawn a proposal to impose 5 per cent service tax on services provided by air conditioned hospitals of more than 25 beds and on diagnostic services.