CBDT: Conditions for Claiming Tax Exemption on Payments Received for Covid-19 Treatment

The Finance Act, 2022 had provided tax exemption for amounts received by taxpayers for expenditure actually incurred by them towards their medical treatment or treatment of any member of their family, in respect of any illness related to Covid-19, as well as amounts received as ex-gratia payment by family members of taxpayers who had lost their life due to COVID-19, subject to certain conditions.

The Central Board of Direct Taxes (“CBDT”) vide three notifications, all dated August 05, 2022, has now notified the specific conditions for claiming such tax exemption.

In case the employee taxpayer has received any sum for treatment of COVID-19 for himself or his family members from his employer (Notification No. 90/2022):

The employee taxpayer would be required to submit the following documents to the employer:

• COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations;
• all necessary documents of medical diagnosis or treatment related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive; and
• certification in respect of all expenditure incurred on the treatment of COVID-19 or illness related to COVID-19.                                          

In case the taxpayer has received any sum for treatment of COVID-19 for himself or his family members from any person (other than his employer) (Notification No. 91/2022):

The taxpayer would be required to keep a record of the following documents:

• COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations; and
• all necessary documents of medical diagnosis or treatment related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive.

The taxpayer would also be required to furnish a statement in Form No. 1 with the Income Tax authorities, containing details of the amount received and actually incurred by him, towards expenditure for his or his family member’s medical treatment, which has, in turn, to be furnished within nine months from the end of the financial year, in which the amount is so received, or December 31, 2022, whichever is later.

In case of any sum received by a family member of taxpayers, who have lost their life due to COVID-19 (Notification No. 92/2022):

The family member of the deceased individual would be required to keep a record of the following documents:

• COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations; and
• A medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that the death of the person is related to COVID-19.

The notification also provides that the exemption would be available only if the death of the individual is within six months from the date of testing COVID-19 positive or being clinically determined as a COVID-19 case.

The family member of the deceased individual is also required to furnish a statement in Form A to the Assessing Officer, containing details of the amount received from the employer of the deceased individual and from any other person, which has to be furnished within nine months from the end of the financial year in which the amount is received, or December 31, 2022, whichever is later.

A family member in relation to an individual has been defined to mean:

1. The spouse and children of the individual; and
2. The parents, brothers and sisters of the individual or any of them, are wholly or mainly dependent on him.