New Income Tax exemption rules for expenses on Covid-19 treatment: Check conditions and documents required

Income Tax exemption rules 2022 for expenses on Covid-19 treatment: Check new CBDT notification, terms and conditions, documents required for claiming exemption

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Income Tax exemption for Covid-19 treatment: The Central Board of Direct Taxes (CBDT) recently notified new conditions and a form for claiming exemption against expenses on Covid-19 treatment. 

As per the notification dated 5 August 2022, you will have to submit certain documents to your employer and a form to the income tax department to claim tax exemption on money received from an employer or relatives for Covid-19 treatment. 

Last year, the Central Government announced that the money received by individuals for Covid-19 treatment or ex-gratia received by family members on death due to Covid-19 would be exempt from income tax. This was also notified in Budget 2022. This exemption is effective from FY 2019020 onwards. 

What the new notification says

As per the August 5 notification, employees who have received money for treatment of covid-19 should submit the following documents to their employer: 

  • The COVID-19 positive report of the individual or his family member, or medical report if clinically determined to be COVID-19 positive through investigations in a hospital or an in-patient facility by a treating physician for a person so admitted; 
  • all necessary documents of medical diagnosis or treatment of the individual or family member due to COVID-19 or illness related to COVID-19 suffered within six months from the date of being determined as a COVID-19 positive.
  • Documents backing details of the total expenditure incurred on the treatment of COVID-19 or illness related to COVID-19 of the individual or any family member. 

According to the notification, a statement of any amount received for any expenditure actually incurred by an individual for his medical treatment or treatment of any member of his family, for any illness related to COVID-19 for the purposes of clause (XII) of the first proviso to clause (X) of sub-section (2) of section 56 of the Income-tax Act, 1961 will be verified and furnished in Form No. 1.

The Form No. 1 includes details such as: 

  • PAN
  • details of diagnosis of being positive for COVID-19
  • total amount received from any person
  • Name, address and PAN of the person from whom the amount has been received
  • Financial year in which the amount has been received.

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In case of death of an individual, the following conditions would apply for claiming tax exemption: 

  • 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.

The family member of the individual will have to keep a record of the following documents: 

  • 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
  • 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).

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