The Buyt Desk
The Central Board of Direct Taxes (CBDT) has rolled out a number of measures to lessen the income tax burden for those who had an up and close battle with COVID19. According to the Ministry of Finance, if you have received financial assistance from your employer or friends and relatives for the treatment of COVID19 then your income tax on this money will be fully tax exempted. Any payment received as compensation in case of the death of an employee due to COVID 19 would also be entitled to income tax relief.
Any amount spent by the employer for the treatment of COVID19 would be free from tax. Not just the beneficiary and his/her family but also the person/company who pays for this will not face liability.
Tax Exemption Limit on Treatment Cost
Amid the second wave of COVID 19, several taxpayers received monetary help from their employers, friends or relatives. Income Tax treats receiving of any fund other than from your close relative as your income. If a friend or a relative who is not specified in the Income Tax Act’s Section 56 helps you with money above Rs 50,000 the receiver is liable to pay tax on it. This money will be added to his/her income and taxed as per the eligible income tax slab. This money is treated as income from other sources. In case of the employer helping you with money, it will be taxed as per your perquisite
The CBDT ‘s statement said “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 an income-tax exemption to the amount received by a taxpayer for medical treatment from an employer or from any person for treatment of Covid-19 during FY 2019-20 and subsequent years.”
Tax exemption On Ex-gratia
Income tax will be exempted on monetary compensation received by the family on the death of a dear one. If the employer makes the ex-gratia payment the full amount will be tax-free. If such payment is received from a friend or a well wisher then an amount of Rs 10 lakhs will only be exempted.
CBDT’s official statement – “Unfortunately, certain taxpayers have lost their lives 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 arising 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.”
