The government, via a press release dated June 25, 2021, announced that money received by an individual for expenses incurred on the treatment of Covid-19 or as ex-gratia received (by family members) on death due to covid-19 from an employer or any relative/well-wisher would be exempt from income tax. The income tax exemption was notified in Budget 2022.
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.
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