Income tax exemption is effective from FY 2019-20. Since the income tax benefit was given retrospectively, therefore, if the recipient of the ‘assistance’ money had not informed the government about it at the time of filing the income tax return, it was not an issue. This is because the exemption was given under section 56 of the Income Tax Act, 1961. As per income tax laws, money received under this section is not considered as income and hence need not 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 (died due to COVID) to get ex-gratia payment from the employer of the deceased or financial assistance from relatives and other well wishers. A form and specified proof.
As per the notification, such family members have 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 family members. The conditions are as follows:
a) the death of the person must have occurred within six months from the date of the person testing positive or from the date medically determined as a COVID-19 case for which the family member has received any amount;
In addition, the notification also asked the family members to keep a record of the following documents:
a) the person’s COVID-19 positive report, or the medical report if determined to be clinically COVID-19 positive through examination in a hospital or through an inpatient facility by a treating physician Is;
b) A medical report or death certificate issued by a medical practitioner or a Government Civil Registration Office stating that the person’s death is related to the coronavirus disease (COVID-19).
Form A must be submitted within 9 months from the end of the financial year in which the money is received or December 31, 2022, whichever is later. So, if you have received the money in the FY 2020-21 (which ended on March 31, 2021), you will have to submit ‘Form-A’ by the deadline of December 31, 2022.
Abhishek Soni, CEO, Tax2win.in – an ITR filing firm says, “If a family member does not submit Form-A as defined by CBDT by the time limit applicable to him, such income tax exemption will not be available to an individual. To the family member of K who has passed away due to Covid-19.”
As per the press release, 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 will be exempted up to Rs 10 lakh only.
Soni says, “The income tax exemption to the extent of Rs 10 lakh includes money received for meeting the cost of treatment of COVID-19 and financial assistance to the family member of the deceased.
Form A to be submitted by a person asks them to provide the following information:
- Name, Address, PAN
- Recipient’s relationship with the deceased
- Details of diagnosis of being positive for COVID-19, i.e., Medical serial number / ID number
- 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 stating that the death is related to Coronavirus Disease (COVID-19), i.e., Sl. / ID number of the medical report
- Amount received from employer of deceased and other person(s)
- Name, address and PAN of the employer of the deceased:
- Financial year in which the amount is received
- amount received from employer
- Name, address and PAN of other person/s
- Financial year in which the amount is received
- Amount received from other person/s
- Total amount received (both from employer and other persons)
While submitting Form A, a person needs to attach the above mentioned documents i.e. covid report stating that the date of diagnosis and date of death is within 6 months as well as medical report certifying that The death has occurred due to Kovid-19. ,