Tax benefit available only if death certificate mentions Covid, say experts

For exemption on Covid-19 payments, file revised return for FY 2021-22, updated return for earlier years

Now, family members of Covid-19 victims who received an ex-gratia payment from the deceased’s employer, or financial assistance from relatives, need to submit a form and provide specific evidence to get tax exemptions. According to amendments made to the Finance Act, 2022, such ex-gratia payment from the employer will not be treated as a perquisite under the Income-Tax (I-T) Act, 1961.
 
The new rule
 
This year’s Union Budget allowed tax exemption on the amount received by a person to spend on his own, or his family member’s, medical treatment for Covid-19. The Central Board of Direct Taxes (CBDT) issued a notification in this regard last week.

 

The first rule pertains to the amount received by a person to meet the expenditure on his own, or his family’s, treatment of Covid-19. That amount shall be tax exempt. Ankit Jain, partner, Ved Jain & Associates, says, “The exemption is limited to the total amount spent on medical expenditure incurred within six months of a Covid-19 positive test. The employer must obtain from the employee all documents related to the expenses incurred on such treatment.”
 
The second rule deals with the amount received by the family on a family member’s death. The amount should have been received within 12 months of death. Such ex-gratia payment received from the employer is fully tax exempt. Sandeep Bajaj, managing partner, PSL Advocates & Solicitors, says, “An amount received from anyone other than the employer, such as a well-wisher, relative, etc. shall be exempt only up to Rs 10 lakh.”

 
Submit documents
 
Family members need to submit a set of documents to claim benefits under this scheme (see box).
 
Saraswathi Kasturirangan, partner, Deloitte India says, “The notification requires the recipients of such ex-gratia amounts to file information in Form A within nine months of the financial year when they received the amount, or December 31, 2022, whichever is later.”
 
With regards to reimbursement received for treatment of Covid-19, Suresh Surana, founder, RSM India says, “The details of the amount received in any financial year must be furnished in Form No. 1 to the I-T Department within nine months from the end of the financial year or December 31, 2022.”

 
Update ITR?
 
This tax exemption can be availed for FY 2019-20 (assessment year 2020-2021) and subsequent years. The new circular, however, came about a week after the last date for filing the income-tax return (ITR) for financial year 2021-22.
 
Jain says, “If someone has not yet claimed these tax exemptions, she can do so by revising her return before the end of this year.”
 
Bajaj points out that the time for filing revised ITR for AY 2020-21 and AY 2021-22 has already come to an end.
 
According to Surana, “Concerning AY 2022-23, the taxpayer may revise her returns on or before December 31, 2022 or before the completion of assessment, whichever is earlier. However, since the due date for filing revised returns for any assessment year prior to AY 2022-23 has already lapsed, the taxpayer may file an updated return, the due date for which is 24 months from the end of the relevant assessment year, if applicable under Section 139(8A) of the I-T Act.”

 
Need documentary proof
 
In many cases, even though a person may have suffered from Covid-19, the doctor’s report may have cited a different reason for death. Ashutosh K. Srivastava, senior associate, SKV Law Offices, says, “The notification fails to take into account that in many cases, Covid-19 deaths were cited as having been caused due to cardiac arrest. Such cases may not be able to take advantage of the notification.”
 
Families may also have to withdraw their claims in certain cases. Bajaj says, “If the family of such an individual has not maintained the required documents and has already availed of the exemption under the scheme, it may have to withdraw its claim due to the non-availability of the requisite documents.”

Documents the family needs to submit

• Covid-19 positive report of the individual
• The death certificate must mention Covid-19 as the cause of death
• Along with the above, Form A needs to be submitted within nine months from the ending of the financial year in which such perquisite was received, or December 31, 2022, whichever is later
• Individual receiving any reimbursement related to expenditure incurred by him on his medical treatment or treatment of a family member for Covid-19 related ailment needs to fill Form No. 1 and submit to the I-T Department
• The same timeline applies to this form as well