The income tax exemption is effective from FY 2019-20 onwards. As the income tax benefit was granted retrospectively, hence, if the receiver of the ‘help’ money had not informed the government about the same while filing an income tax return, it was not an issue. This is because the exemption was granted under section 56 of the Income-tax Act, 1961. As per the income tax laws, money received under this section is not considered as income and hence is not required to be reported to the income tax department.
Now, the Central Board of Direct Taxes (CBDT) issued a notification on August 5, 2022, asking family members (of individuals who had passed away due to covid) who had received ex-gratia payment from the employer of the deceased or financial assistance from relatives and other well-wishers, to submit a form and specified proofs.
As per the notification, such family members are required to submit a form called ‘Form A’ to the assessing officer. Further, the CBDT has specified the conditions under which the above-mentioned income tax exemption can be claimed by the family members. The conditions are as follows:
a) the death of the individual should be within six months from the date of testing positive or from the date of being clinically determined as a COVID-19 case, for which any sum of money has been received by the member of the family;
Further, the notification has asked the family members to keep the record of the following documents as well:
a) the COVID-19 positive report of the individual, or medical report if clinically determined to be COVID-19 positive through investigations in a hospital or an inpatient facility by a treating physician;
b) a medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that death of the person is related to coronavirus disease (COVID-19).
Form A must be submitted within 9 months from the end of the financial year in which money is received or December 31, 2022, whichever is later. Hence, if you have received the money in FY 2020-21 (which ended on March 31, 2021), then you have to submit the ‘Form-A’ by December 31, 2022 deadline.
Abhishek Soni, CEO, Tax2win.in – an ITR filing firm says, “If a family member does not submit the Form-A as defined by the CBDT by the deadline applicable to him/her, then such income tax exemption will not be available to the family member of an individual who has passed away due to Covid-19.”
As per the press release, the income tax exemption is available without any limit for the amount received from the employer. The amount received from any other relatives and well-wishers shall be exempted up to Rs 10 lakh only.
Soni says, “The income tax exemption for the limit of up to Rs 10 lakh is inclusive of money received for meeting the cost of treatment of covid-19 and for financial assistance to the family member of the deceased.”
Form A to be submitted by an individual asks them to provide the following information:
- Name, Address, PAN
- Relationship of the recipient with the deceased
- Details of diagnosis of being positive for Covid-19 i.e., S.No./ Id No. of the medical
- report/ test report
- Details of death due to COVID-19 and a medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that death is related to coronavirus disease (COVID-19) i.e., S.No./ Id No. of the medical report
- Amount received from employer of the deceased and other person(s)
- Name, address and PAN of the employer of the deceased:
- Financial year in which amount has been received
- Amount received from the employer
- Name, address and PAN of the other person/persons
- Financial year in which amount has been received
- Amount received from other person/ persons
- Total amount received (both from employer and other persons)
While submitting Form A, an individual is required to attach the documents mentioned above i.e., the covid report stating that the date of diagnosis and date of death is within 6 months as well as the medical report certifying that the death is due to covid-19.
Saraswathi Kasturirangan, Partner, Deloitte India says, “Ex-gratia payment received by family members on account of the death of a person due to Covid 19 from the employer of such person or from any other person during FY 2019-20 and subsequent years is tax exempt. While the entire amount is tax exempt if received from the employer, the exemption is limited to an aggregate of Rs. 10 Lakhs if received from others. The CBDT has now provided guidelines that such exemption shall be available where the death has happened within a period of 6 months from the date of the person being tested positive or clinically diagnosed as having Covid 19. Further, the notification requires the recipients of such ex-gratia amounts to file information in Form A within 9 months of the financial year of receiving the amount or 31 December 2022 whichever is later. The family is required to retain the relevant reports relating to the person being determined as Covid positive as well as death certificate clearly calling out the reason for death as Covid 19.”