India: Tax On Freebies To The Doctors

Last Updated: 30 November 2012
Article by Alishan Naqvee and Dhruv Manchanda

Reported here are the recent developments in the regulatory landscape of India, that are relevant for the medical professionals as well as the pharmaceutical and allied healthcare industry ("Industry").

The Central Board of Direct Taxes, Ministry of Finance, India ("CBDT") has on August 1, 2012 directed, in effect, that the Industry as well as medical practitioners would be liable to income tax on the value of any freebies given by the Industry to the medical practitioners.

The (Indian) Income Tax Act ("IT Act") permits deduction of revenue expenditures from the business income, and thus from the resultant income tax, if the expenses are incurred exclusively for the purpose of business or profession and such expenses are not prohibited by the law.

The Medical Council of India, a regulatory body constituted under the Medical Council Act, 1956 has, by an amendment on December 10, 2009 to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ("IMC Regulations"), imposed a prohibition on the medical practitioners from receiving any gifts, travel facilities, hospitality, cash or monetary grant from the Industry. Our analysis of the 2009 amendment is available here.

Resultantly, in CBDT's view, such freebies amount to expenses prohibited by the law, and are, therefore, inadmissible as an expense under the IT Act, attracting income tax. The CBDT has further prescribed that the value of the freebies enjoyed by the medical practitioners is also taxable as 'business income' or 'income from other sources', as the case may be, for such medical practitioners.

Government Issues Draft Regulations for Clinical Trials

Often criticized for lack of stringent regulations on clinical trials, the Ministry of Health and Family Welfare ("MoH&FW") has taken not one but three quick steps in that direction. The departments of the MoH&FW have come up with two notifications and one set of guidelines, as discussed below, inviting suggestions and objections from the public for consideration by the MoH&FW before coming up with the final set of regulations.

The notifications, viz. the 3rd and the 4th amendments to the Drugs and Cosmetics Rules ("Rules"), dated July 17, 2012, supplement the requirements for prior permission to conduct any clinical trial in India and registration of the ethics committees with the licensing authority under MoH&FW ("Licensing Authority"), respectively.

As per the 3rd amendment, the prior permission for clinical trials would be granted once the Licensing Authority is satisfied that the data submitted with the application in support of the proposed clinical trial is adequate. It also specifies that the permission to conduct clinical trial should be subject to specific conditions as may be prescribed on a case to case basis, in addition to the following general conditions:

  • Compliance with the approved protocol, Good Clinical Practice Guidelines for Clinical Trials in India ("GCP Guidelines") and other applicable regulations including the relevant schedule of the Rules;
  • Compliance with the "Ethical Guidelines for Biomedical Research on Human Participants" published by the Indian Council of Medical Research, New Delhi;
  • Registration of the clinical trial at The Clinical Trials Registry – India before enrolling any patient in the study;
  • Submission of annual status report of each clinical trial, along with detailed reasons for termination of any trial;
  • Reporting of SUSARs (Suspected Unexpected Serious Adverse Reactions) to the Licensing Authority and other investigators within 14 days of their occurrence;
  • Provision of complete medical care as well as compensation for any study related injury or death, with adequate mentioning in the informed consent document; and
  • Details of compensation to be informed to the Licensing Authority.

The 3rd amendment widely empowers the Central Drugs Standard Control Organization ("CDSCO") to carry out regulatory compliance checks at the premises of the sponsors, clinical research organizations and clinical trials sites and to search and seize records, data as well as investigational drugs. The Licensing Authority has been empowered to issue show cause notices, warnings, directions for suspension/cancellation of the clinical trials and impose restrictions on investors/sponsors/CROs from conducting trials in the future. An appeal against any such directions may be preferred before the Central Government within a period of 90 days.

The 4th amendment seeks to prescribe for once in 5 year registration of the ethics committees with the Licensing Authority and prohibits them from reviewing or approving any clinical trial in absence of such registration. It also seeks to make the ethics committee responsible for reviewing reports on serious adverse events and recommending adequate compensation

in accordance with the guidelines (discussed below). It reiterates composition of the ethics committee and specifies the records and documents to be maintained by the ethics committees.

The third step, namely the 'Guidelines for Determining Quantum of Financial Compensation to be paid in case of Clinical Trial Related Injury or Death', are issued by the CDSCO on August 3, 2012. As the name suggests, the guidelines seek to provide a mechanism for calculation of compensation in cases of injury or death related to clinical trials, based on the parameters of age and income of the subjects, seriousness and severity of the disease and extent of permanent disability (in cases of injury).

The guidelines note that in terms of the GCP Guidelines, any research subject who suffers physical injury, as a result of his participation in clinical trials, is entitled to financial or other assistance to compensate equitably for any temporary or permanent impairment or disability. In case of death, the dependents of the subject are entitled to material compensation. The GCP Guidelines, however, do not provide for the procedure for payment of compensation and criteria for determining the amount of financial/material compensation to be paid in the cases of injury or death. The guidelines seek to fill this void once finalized and enforced.

The notifications and guidelines are sequel to the notification on clinical trial compensation published earlier by the MoH&FW on November 18, 2011 inviting suggestions and objections from the public. Our submissions to the earlier notification of the MoH&FW dated December 30, 2011 are available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Alishan Naqvee
Dhruv Manchanda
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions