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Tax Exemption on Ex-Gratia to Employees for COVID-19

tax-exemption-on-ex-gratia-to-employees-for-covid-19

In a measure aimed to grant relief, the Central Government announces income-tax exemption to the amount received by a taxpayer for medical treatment for COVID-19, from employer or from any other person and on Ex-gratia amounts received from employer or from other persons, on death due to COVID.


Many taxpayers and their families have received financial help from employers and well-wishers for COVID-19 treatment or ex-gratia help following COVID-related deaths. To ensure that no income tax liability arises on this account, the following exemptions have been granted:



1. Amount paid for medical treatment to an employee by an employer or to any person by any other person on account of treatment of COVID for FY19-20 and subsequent year would not be taxed in the hands of the employee or any person receiving the benefit 


2. Exgratia payment by an employer to an employee's family or by any person to any other person's family on death of the employee or any other person on account of COVID for FY19-20 or subsequent year would be exempt from tax 


(Ex Gratia payment from any other person is to be restricted to Rs 10 lakh) 


tax-exemption-on-ex-gratia-to-employees-for-covid-19


Extract of Press release dated 25.06.2019 on Income-tax exemption on Ex Gratia to Employees for COVID-19


A. Tax exemption


I. Many taxpayers have received financial help from their employers and wellwishers 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 income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of Covid-19 during FY 2019-20 and subsequent years.


II. 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. 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.


Necessary legislative amendments for the above decisions shall be proposed in due course of time.


A number of companies have decided to continue their monthly salaries till the age of retirement as an ex-gratia measure to those employees who have died due to COVID. Several major companies are also bearing the complete cost of treatment after their employees are infected with the coronavirus and require hospitalisation. This relief will provide a certainty to the employees or their family members about the non-applicability of income-tax or exemption to such ex-gratia payment.



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