Financial aid sought for treatment costs also exempt from income tax.
The government on Friday announced Income tax relief for COVID-19 affected taxpayers who had to rely on financial aid for their treatment costs and exempted ex-gratia payments of up to ₹10 lakh from employers and other well-wishers to the families of those who passed away.
The tax relief measures have been granted retrospectively from the onset of the COVID-19 pandemic, though tax practitioners are not clear how tax returns already filed for 2019-20 can be revisited.
“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,” the Finance Ministry said in a statement.
“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,” it said.
Similarly, no income tax liability will arise on financial aid received from employers and well-wishers for meeting COVID-19 treatment costs, effective from financial year 2019-20. No cap has been imposed on this tax break, unlike the ex-gratia payments.
Necessary legislative amendments for effecting these decisions shall be proposed in due course of time, the ministry said.
“This brings much needed tax relief to taxpayers, who have suffered from COVID and received monetary help from their employer, friends and extended families, either for treatment or on account of a family member’s death from COVID,” said Shailesh Kumar, Partner, Nangia & Co LLP.
“Though the relief is granted retrospectively from 2019-20 onwards, since the due date for filing that year’s income tax returns has already expired, it would be important to see whether the Government revives the time limit for filing those tax returns,” he pointed out.
IT Act deadlines extended
The Central Board of Direct Taxes has extended the last date for linkage of Aadhaar with PAN from June 30 to September 30, 2021, while granting more time for several other compliances under the Income Tax Act of 1961.
More time has also been granted for taxpayers to remit tax dispute settlement amounts under the Vivaad Se Vishwas scheme. The ministry said these deadlines were being extended owing to ‘the inconvenience caused by the impact of the COVID-19 pandemic’, so as to ease the compliance burden of taxpayers ‘during this difficult time’.