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NEW DELHI: The Central Board of Direct Taxes (CBDT) has introduced a new condition for granting tax exemption to the Covid-related aid received by the family of a person who died due to Covid.
Section 56 of the Income Tax Act exempts aid received by the family member of a person who died due to Covid subject to certain conditions. Income Tax Act says that this aid has to be received within one year of the person’s death and meet any other condition the government specifies.
The latest order from CBDT introduces a new condition. The death of the individual should be within six months from the date of testing positive or from the date of being clinically determined as a Covid-19 case for which any sum of money has been received by the member of the family.
The fund could either be from the employer of the deceased person or from any other person subject to a maximum of ₹10 lakh. Such sum will not be counted as taxable under the head ‘income from other sources,’ if it meets all the conditions.
The order also said that the family member of the individual should keep a record of a list of documents including the Covid-19 positive report of the individual or medical report if clinically determined to be Covid-19 positive through investigations in a hospital or at any other facility. Also, details of such funds received have to be reported in a specified form latest by end of December 2022, the order said.
“CBDT has issued notifications on 5 August, 2022 prescribing conditions for claiming exemption in respect of a perquisite by way of reimbursement by the employer in respect of any expenditure for treatment of any illness relating to Covid-19. CBDT also has issued notification prescribing conditions for exemption from tax under section 56(2)(x) in respect of amount received from unrelated person for treatment of illness relating to Covid and also in respect of amount received from employer or any other person by the family of the deceased who died due to Covid -19 illness," said Ved Jain, former president of Institute of Chartered Accountants of India (ICAI).
Jain explained that the tax exemptions were announced on June 25, 202, but it was stated that necessary legislative amendments for these decisions would be proposed in due course of time. Thereafter, Finance Act, 2022 inserted the amendments in the Income Tax Act with a rider that these exemptions though available from AY 2020-21 (FY 2019-20), shall be allowed subject to fulfilment of conditions to be prescribed. The latest notifications have been issued prescribing the conditions subject to which these exemptions will be allowed to the taxpayers.