On 25th June 2021 as Media broke out the news of income tax exemptions on expenses incurred on medical treatment of Covid, it elated the huge class of commons taxpayers who took a sigh of relief as the news made its way among them. Though the tax reliefs were real but they were not in exact terms as most of the media initially pronounced it. As the mist over the news cleared, taxpayers got to know it wasn’t as full of relief as was told to them initially. Let’s know the reason.
On Friday, Government through press release announced provision of income tax exemption to Covid 19 related medical expenses. Exemption was also announced on ex-gratia amount received in case of death due to Covid.
As per press release, Income tax exemption would be available to a person on amount received for medical treatment of Covid 19 from an employer or any other person during Financial Year 2019-20 and subsequent years.
These measures are being widely welcomed but at the same time it is being expressed by experts that government has left out a major chunk of people while granting income tax exemption on Covid related medical expenses.
The announcement leaves out those taxpayers who have incurred expenses on medical treatment due to Covid 19 out of their own pocket.
The income tax exemption as announced vide press release is only available to those who have received any amount from employer or from any other person. Here the condition laid down is of having received the amount from third person. In case there is no amount received, there would be no tax exemption.
The amount received thereby first needs to be part of the income of the individual. Say a person receives Rs. 1,00,000/- from third person as medical expenses for Covid treatment. He would be showing this receipt of one lac rupees first as his income and then would get exemption against it rendering the receipt as non-taxable.
If these expenses are borne by you without having received any amount from others, then you would not be eligible for the exemption.
The country was worst hit by Covid 19 second wave recently and there was such a sudden spike in the cases that the shortage of hospital beds, oxygen supplies and medicines was faced all across the nation. Hospitalization ratio was on the top during the time. The hefty medical and hospital bills have left a huge hole in the pocket of the common man.
Generally, these medical and hospital bills are borne by the individual himself and are not reimbursed in most of the cases. Therefore, these medical expenses on account of the declared pandemic were expected to get some tax relief from the government. Experts are of the opinion that the government has missed the trick by not including self-incurred medical expenses in the Covid related tax reliefs announced on 25th June.
Options available for providing exemptions on out-of-pocket Covid related medical expenses
Under section 80DDB similar sort of benefit is available for medical treatment of certain specified ailments for self or a dependent. This income tax provision introduced in Financial Year 2018-19, allows an individual to claim deductions on actual payment basis for an amount up to Rs. 40,000/- for person aged below sixty years and upto Rs. 1,00,000/- for senior citizen. As proof a taxpayers is required to get a certificate for medical treatment from the specified medical specialist.
The government may provide similar deduction or exemption for medical treatment or hospital expenses pertaining to Covid 19. Or It could also include Covid 19 in the list of specified ailments prescribed under already exiting Section 80DDB to provide benefits to the taxpayers.
Ex gratia Tax Exemption for Covid casualties
Ex gratia payments received by the family person on death due to Covid 19 has also been exempted from income tax. There would be no limit on amount received from an employer on this account while such receipts from other persons would be limited to an aggregate amount of Rs. 10 lakhs.
CA Kalpak Kaplash
