Centre exempts tax on Covid-19 expenses

Aiming to benefit the common person, the Indian government announced exemption on an employee’s Covid treatment expenses on 25 June 2021. This exemption is also valid on expenses carried by employers or other individuals for FY2020 and the next year.

Here are a few key points of this decision:

• The exemption is applicable to any amount paid by an employer.
• An upper limit of Rs. 10 lakh applies if paid by any other person.
• Income tax exemption on Ex-gratia amount received by the deceased’s family members.

Exemptions on Covid-related spending: Detailed view

Tax exemption is provided for ex gratia the deceased’s family members have received. Also, there is no upper limit on the amount acquired from an employer.

The centre mentioned that exemption on tax for up to Rs. 10 lakhs will be given if provided by other people or a well-wisher of the family.

The ministry also explained that well-wishers and employers of various taxpayers who have passed away due to this pandemic helped them cope up with this deadly disease with financial assistance. This decision on tax exemption will provide relief to these families.

Furthermore, since the government allows this exemption only on medical expenses and upon the death of an individual, taxpayers should maintain appropriate documents and medical bills.

Deadline extended for tax compliances

Aside from tax exemptions, the Indian Government has also decided to relax several compliance measures by extending their deadlines. The centre made this decision after reviewing certain difficulties faced by taxpayers in meeting these compliances.

Deadline extension for PAN linking with Aadhaar is a crucial decision in that regard. It has been extended to 30 September 2021.

Few other deadline extensions for tax compliances are:

• GOI extended the deadline for “vivad se viswas” payment by 2 months, from 30 June to 31 August 2021. The government introduced this scheme to settle tax disputes between the income tax department and taxpayers.
• The Indian government approved an extension to file a TDS return from 30 June to 15 July 2021. Moreover, deadline to present the equalisation levy was extended from 30 June to 31 July 2021.
• Further, one can complete objections to DRP (Dispute Resolution Panel) till 31 August.
• First-time homebuyers can reap tax benefits by investing in residential property. The centre has prolonged the deadline by 3 months.
• Individuals can now complete certain compliances like deposit, investment, payment, purchase, construction, acquisition, or any such actions till 30 September 2021.

Takeaway

Per experts, the exemptions offered under this measure will bring significant relief to the majority of Indian households. However, this relief is guaranteed from FY2020 onwards, the ITR filing date for which has already expired. So, it would be crucial to see whether the government allows an extension to the time limit for filing ITR for FY2020.