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CBDT Notifies Conditions for Tax Exemption on COVID-19 Treatment by Employees

cbdt-notifies-conditions-for-tax-exemption-on-covid-19-treatment-by-employees

CBDT vide Notification No. 90/2022 dated 05.08.2022 in S.O. 3703(E) notified the conditions for claiming income-tax exemption on the sum received by employees from the employer for treatment of COVID-19 in accordance with the provisions of the first proviso to section 17(2) of the Income-tax Act, 1962 (‘Act’).


This notification, and consequently these notified conditions, shall apply retrospectively from AY 2020-21.


In order to claim exemption from any sum received by an employee from his employer towards the treatment of illness due to COVID-19 for himself or any member of his family shall be exempt from tax provided these notified conditions are satisfied.



The sum and substance of this notification or the notified conditions are that the employee has to submit a list of certain documents to the employer for claiming the exemption. In case the employee fails to submit these prescribed documents for treatment of COVID-19, then the amount so received from the employer by the employee shall be chargeable to tax as ‘salary’ under section 17(2) of the Act.


The term ‘family’ is defined but the definition as given in section 10(5) of the Act is imported here. As such,  it is defined as "family", in relation to an individual, shall have the same meaning as in clause (5) of section 10.


Finance Act, 2022 has provided for income-tax exemption of amount received for medical treatment of COVID-19 and on account of death due to COVID-19 by an employee from his employer or from any other person during the financial year 2019-20 and subsequent years. These amendments are retrospectively effective from 1st April 2020 or Assessment Year 2020-21.


The exemption is provided for the receipt of the following amounts by the respective persons related to COVID-19-


Receipt from Employer:


Receipt of an amount (limited to actually incurred) by Employee from his employer for treatment of COVID-19 for self and family member.


Receipt of exgratia amount by a family member of the deceased employee who died due to COVID-19 from the employer of deceased employee


Receipt from any other person:


Receipt of an amount by an Individual from any person for medical treatment of COVID-19 for self and family member


Receipt of exgratia amount by a family member of the deceased individual who died due to COVID-19 from any person


The tax exemption is allowed to the following recipients-


I. Receipt of amount by the employee from his employer for medical treatment of COVID-19

Reimbursement of medical expenses for medical treatment of COVID-19 of self and family member of the employee

Full amount received is exempt in the hands of the employee [Sec. 17(2)]


II. Receipt of exgratia amount by the family member of the deceased employee on death of the employee due to COVID-19 from deceased non-relatives

Receipt of exgratia amount (actual medical expenditure is irrelevant here) by the family member of the deceased employee who died due to COVID-19

Full amount received is exempt from tax in the hands of the family member of the employee if-

a) The amount is received within 12 months from the date of death and,

b) subject to such conditions as may be prescribed

[Section 56(2)(x)]


III. Receipt of amount by any person (other than employee) for medical treatment of COVID-19

Reimbursement of medical expenses for medical treatment of COVID-19 of self and family member of an individual from any non-relative

Full amount received is exempt in the hands of the employee [Sec. 56(2)(x)]


IV. Receipt of exgratia amount by the family member of the deceased individual on his death due to COVID-19 from non-relatives

Receipt of exgratia amount (actual medical expenditure is irrelevant here) by the family member of the deceased individual who died due to COVID-19

Full amount received is exempt from tax subject to maximum of Rs. 10 Lakh in aggregate in the hands of the family member of the individual if-

a) The amount is received within 12 months from the date of death and,

b) subject to such conditions as may be prescribed

[Section 56(2)(x)]


Note: 1. It is proposed 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.

 

2. No condition as to treatment in a government hospital or private hospital etc. is prescribed in the Act. Hence, the treatment may be undertaken in any hospital including home care and COVID Care Centre.

 

3. The exemption covers receipt of reimbursement of actual expenditure for medical treatment in respect of any illness relating to COVID-19 which shall, in author’s view, include expenditure incurred during quarantine/isolation due to COVID positive.

 

4. The ceiling of Rs. 10 Lakh exgratia amount shall apply only in case of receipt of the same from non-relatives as any amount received from any relative is anyway excluded from the applicability of section 56(2)(x) vide clause (i) to first proviso to section 56(2)(x). 

 

5. The ceiling of Rs. 10 Lakh (applicable for non-employee cases) is in aggregate and may be received from one or more than one person.

 

6. The wording of the proposed amendment in section 56(2)(x) prescribes that tax exemption on receipt of exgratia by the family member of the deceased individual shall be exempt only if the amount does not exceed Rs. 10 Lakh. In case it exceeds Rs. 10 Lakh, the entire amount shall be taxable.


For this purpose, amendments have been made in Section 17 and Section 56 of the Act. This article discusses the amendments related to section 17 only.


The conditions notified by the CBDT in respect of exgratia amount received on account of COVID-19 from non-relatives are discussed in this article.


Section 17(2) exempts the amount received for reimbursement of actual medical expenditure for treatment of self or his family member for COVID-19 in the hands of the employee from his employer. In case of the death of the employee due to COVID-19, the same will be exempt from tax in the hands of the deceased employee as well as a family member.


Read also on COVID-19 tax relief

Tax exemption to ameliorate stress due to COVID-19

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

Tax Exemption on Amount Received for COVID-19: Budget 2022


Clause (2) of section 17 of the Act, inter alia, provides the definition of “perquisite”. However, certain exceptions have been provided which shall not include as perquisites.


The Finance Ministry released a press statement dated 25.06.2021 where it was announced that income-tax shall not be charged on the amount received by a taxpayer for medical treatment from the employer or from any person for treatment of COVID-19 during FY 2019-20 and subsequent years. 


The first proviso to section 17(2) provides for exemption from perquisite of any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf. This provision is inserted in the Statute with retrospective effect from 1st April, 2020 or AY 2020-21.


This notification is issued by the CBDT in exercise of the powers conferred to it under the said proviso.


The conditions notified by the Board for claiming exemption under section 17(2) by an employee in respect of receipt of amount from his employer for treatment of COVID-19 for self or family member as per this Notification No. 90/2022 dated 05.08.2022 are as follows:-


1. The employee shall submit a COVID-19 positive report of self and family member to the employer.


2. The employee shall submit all necessary documents of medical diagnosis or treatment of the employee or his family member for COVID-19 or illness related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive to his employer.


3. The employee shall submit a certification in respect of all expenditure incurred on the treatment of COVID-19 or illness related to COVID-19 of the employee or of any member of his family to his employer.


Notes:

 

1. This notification and as such these conditions have been made effective retrospectively from AY 2020-21.

 

2. It is not clarified from whom the certificate should be obtained. Hence, it appears that it should be a self-certificated document by the employee himself. The purpose of this condition seems to determine the actual amount of expenses incurred by the employee for the treatment of COVID-19 illness.

 

3. It is pertinent to note that the return for AY 2020-21, AY 2021-22 and AY 2022-23 has already filed by the respective individuals or employees. The Finance Act, 2022 was notified on 31.03.2022 but the conditions have been notified by the Board five days after the expiry of the due date for filing of return of 31st July 2022 for salaried individuals on 05.08.2022.


Read the full text of CBDT Notification No. 90/2022 dated 05.08.2022 On Claim of Exemption by Employees u/s 17(2) for COVID-19 Treatment


MINISTRY OF FINANCE 

(Department of Revenue) 

(CENTRAL BOARD OF DIRECT TAXES) 

NOTIFICATION 


New Delhi, the 5th August, 2022


S.O. 3703(E).—In exercise of the powers conferred by sub-clause (c) of clause (ii) of the first proviso to clause (2) of section 17 of the Income-tax Act,1961 (43 of 1961),the Central Government hereby notifies the following conditions, namely:-


1. The employee shall submit the following documents to the employer, –


(i) the COVID-19 positive report of the employee or family member, or medical report if clinically determined to be COVID-19 positive through investigations, in a hospital or an in-patient facility by a treating physician of a person so admitted;


(ii) all necessary documents of medical diagnosis or treatment of the employee or his family member for COVID-19 or illness related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive; and


(iii) a certification in respect of all expenditure incurred on the treatment of COVID-19 or illness related to COVID-19 of the employee or of any member of his family.


2. This notification shall be deemed to have come into force from the 1st day of April, 2020 and shall apply in relation to the assessment year 2020-2021 and subsequent assessment years.


[Notification No. 90 /2022/F. No. 370142/31/2022-TPL (Part-2)] 

UMME FARDINA ADIL, Under Secy., Tax Policy and Legislation Division


Note : It is certified that no person is being adversely affected by granting retrospective effect to this notification


Download CBDT Notification No. 90/2022 dated 05.08.2022 On Claim of Exemption by Employees u/s 17(2) for COVID-19 Treatment in PDF format


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