It is Budget time again and the countdown for the Union Budget 2022 has begun. If the pandemic doesn’t play a spoilspot, then Finance Minister Nirmala Sitharaman will most likely present her fourth Budget on February 1 this year.
Last year the government had announced multiple stimulus packages to rejuvenate the economy impacted by the COVID pandemic. It had followed the counter-cyclical fiscal policy to stabilise the business cycle. This policy requires the government to reduce spending/increase taxes in good times and increase spending/reduce taxes in bad times.
“To a large extent, these policies helped the Indian economy to recover from the recession. Typical economic recoveries happen in V, W, Z, U and L shapes. However, economists are starting to think the recovery from COVID-19 might be K-shaped, as technology and large capital firms have recovered faster than small businesses and industries directly affected by COVID-19, such as hospitality,” says Naveen Wadhwa, DGM, Taxmann.
Though these stimulus packages have given a pace to the recovery, it also resulted in a higher inflation rate. Thus, the US Federal Reserve meeting minutes signalled the central bank might raise interest rates sooner than expected. This is a signal that the Indian government might also think about lessening the liquidity from the market.
Whatever be the case, hit hard by the pandemic, loss of job and falling income, the common man is looking towards the Finance Minister with much hope.
Here we are taking a look at how the Union Budget 2022-23 could provide tax relief for Covid patients and their families:
It may be noted that looking at the devastating impact of the COVID-19 pandemic, the Central government, state governments, employers, friends, and philanthropists are providing financial assistance to the infected people and their families. Still, many people in the country are not getting any financial support and are fighting on their own.
Tax experts feel that these people should get a tax deduction in respect of the amount they incur on Covid treatment. The government should consider giving tax reliefs for such financial assistance and provide deductions for the expenses on medical treatment.
“The government had issued a Press Release, dated 25-06-2021, providing that taxpayers receiving financial help from their employers and well-wishers for meeting the expenses incurred on treatment of Covid-19 would get an income tax exemption. Thus, any amount received from the employer or any other person for treatment of Covid-19 would be tax-free,” says Wadhwa.
Further, if a taxpayer dies due to COVID, then any financial assistance received by his family member shall be exempt without any limit where the financial assistance is received from the employer of the deceased. However, where the financial assistance is received from any other person, the exemption amount shall be limited to Rs 10 lakh in aggregate.
It was mentioned in the Press Release that the necessary legislative amendments shall be made in this regard in due course. However, no amendment has been made yet. Thus, the government may bring the requisite amendments in the upcoming Budget.
“Currently, Section 80D of the Income-Tax Act allows deduction of up to Rs 50,000 from gross total income in respect of any expenditure incurred on the medical treatment of a senior citizen (60 years or above) provided he is not covered under health insurance. Thus, the deduction for the medical expenditure is deductible when two conditions are satisfied. First, the person for whom the expenditure is incurred should be a senior citizen, and second, no medical insurance policy has been taken for such person,” informs Wadhwa.
“It is recommended that the scope of Section 80D should be expanded to every person (irrespective of age) to allow a deduction for expenditure incurred on medical treatment of Covid-19 for himself or a family member,” he adds.