Good news for those who received financial support for Covid-19 from their employers! The amount received for Covid-19 treatment will remain tax-free. This includes receiving money from employers or any other well-wisher.
Here’s what Budget 2022 explains about tax relied for Covid-19 affected people –
In June 2021, the Finance Ministry had declared income tax exemption on the amount received by a taxpayer from her employer for treatment of Covid-19. In case a Covid affected person has received financial help from another person, the government will not impose any taxes on that too.
Moreover, those who received any ex-gratia payment from employers or anyone else, due to death of a Covid-19 affected family member, will also be exempt from tax.
This declaration was clearly stated in June 2021 but was formally included in the Finance Bill 2022-23 amidst announcements about Union Budget 2022. According to the budget documents, “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 may be notified by the Central Government, shall not be forming part of perquisite”.
Notably, this financial aid will not be counted as part of gift tax either.
Conditions for Tax-Exemption on financial aid received
In case a deceased employee’s family has received the ex-gratia from the employer post the death, the entire amount transferred will remain tax free. If you have received this amount from someone else, the tax exemption has been restricted to Rs 10 lakh.
It is important to note that this exemption is valid only if you have received the amount within 12 months from the date of death.
If multiple people have contributed to offer financial aid to the family, the aggregate amount of up to Rs 10 lakh will be tax exempt.
When will these changes come into force?
The above-mentioned changes have remained applicable since assessment year 2020-2021. The tax-relief will be applicable to financial year 2019-20 and following financial years.
