In a bid to provide relief to common man amid the second wave of coronavirus pandemic, the Central Board of Direct Taxes (CBDT) has extended various deadlines related to income tax returns. Those who have received financial support from their employers, friends for Covid-19 treatment, will not have to pay tax for the amount, the CBDT said on Friday.
“Many taxpayers have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of Covid-19. In order to ensure that no income tax liability arises on this account, it has been decided to provide income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of Covid-19 during FY 2019-20 and subsequent years," the regulator said in a statement.
The ex-gratia payment received by family members of a person who has died due to Covid-19 from an employer, will be exempted from tax without any limit. The tax exemption will be limited to Rs 10 lakh for the amount received from any other persons such friends and family.
“Unfortunately, certain taxpayers have lost their life due to Covid-19. Employers and well-wishers of such taxpayers had extended financial assistance to their family members so that they could cope with the difficulties arisen due to the sudden loss of the earning member of their family. In order to provide relief to the family members of such taxpayer, it has been decided to provide income-tax exemption to ex-gratia payment received by family members of a person from the employer of such person or from other person on the death of the person on account of Covid-19 during FY 2019-20 and subsequent years. The exemption shall be allowed without any limit for the amount received from the employer and the exemption shall be limited to Rs 10 lakh in aggregate for the amount received from any other persons," the regulator said.
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This new move will provide a huge relief to those taxpayers who have been severely affected by coronavirus. “Necessary legislative amendments for the above decisions shall be proposed in due course of time," the CBDT said.
The income tax exemption on taxpayers or family members receiving monetary help from employers or any other person for Covid-19 treatment is a welcome decision, said Prateek Bansal, associate partner, White & Brief Advocates and Solicitors.
“The said amount of monetary help should correspondingly be allowed as deduction from the taxable income of the employers or such other persons. Further, since the exemption has only been allowed for medical treatment or death due to COVID, appropriate documents or records should be maintained by the taxpayers," Bansal added.
“The announcement provides significant relief to the beneficiaries of Covid relief. Any financial assistance received by a tax payer for Covid treatment will be totally tax exempt. These benefits are available for FY 2019-20 and beyond,” said Saraswathi Kasturirangan, Partner, Deloitte India.
“During Covid-19 pandemic, many people received financial support from their friends, employers, or their well-wishers to bear the expenses incurred for treatment of COVID-19. As per the general provision of Income-tax law, the money received in such a scenario shall be taxable after fulfilling certain conditions which is again a financial burden for taxpayers. The government announced that no tax liability will arise for the amount received by taxpayers from any person for medical treatment of COVID-19 which was much-needed tax relief at this time," said Abhishek Soni, co-founder and chief executive officer Tax2win.in.