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How to Claim Income Tax Exemptions for Covid-19 Treatments

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How to Claim Income Tax Exemptions for Covid-19 Treatments
August 03, 2021

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The coronavirus pandemic turned everybody’s life upside down. Many who contracted the virus ended up in hospital. Some required oxygen while others needed ventilators. The virus wreaked havoc in our lives, and those who recovered now had to worry about paying their large hospital bills. Thankfully, the country rallied behind them. People answered calls for help, donating whatever they could afford to those who required financial assistance. Many employers also helped pay for the medical treatments of their employees. Given the financial hardship many faced, the Central Board of Direct Taxes (CBDT) offered some relief in early 2021. The CBDT decided that financial support to pay for Covid-19 treatments from employers or friends would be exempt from taxes.

Key Details You Need to Know About the Tax Benefit

Let’s take a closer look at the tax benefits offered by CBDT:

  • Medical Relief from Employers

    During the second wave of the pandemic, many people ended up in the ICU, dependent on oxygen machines. Just the rent for an ICU bed per day can often max out most health insurance policies. As people struggled to pay for their medical bills, their employers helped out. Given the extreme financial duress most people faced, the CBDT decided that the amount a taxpayer receives from their employer for medical treatment will be exempt from taxes. As of now, the condition applies to the financial year 2019 to 2020 and every subsequent year.

  • Medical Relief from Others

    At the beginning of the pandemic, several people lost their jobs and have struggled to find new employment. Most individuals worked through their savings but could not deal with large hospital bills as well. Many people who retained their jobs could not afford their treatment either. Friends, family members and well-wishers all came together to help alleviate their financial burden. The new income tax benefits include these payments as well. As long as the money was provided to help pay for medical expenses, the amount is tax-free.

  • Payment to Family Members from Employers

    Many people succumbed to the effects of the virus. Families lost their loved ones and in many cases, the only earning family member. Once again, employers provided financial support to those who lost family members during the pandemic. An ex-gratia payment that families receive from an employer is now exempt from income tax. The CBDT has decided that there should not be any limit on this benefit.

  • Payment to Family Members from Others

    Many people offered to help support families left devastated by the pandemic. Apart from helping organise hospital beds and oxygen cylinders, they also provided monetary support. According to the new CBDT income tax benefits, funds received, up to a maximum of INR 10 lakhs, will be exempt from income tax.

How to Claim Exemption?

While filing income tax returns, individuals must provide bank statements and proof of investment papers as well. To claim deductions under the new CBDT tax benefits, individuals have to furnish all their medical bills to support their claims. If they’ve lost a family member, they will have to submit a copy of the death certificate to claim exemption.

How to Reduce Income TaxLiability

Apart from this new exemption, taxpayers can also claim deductions against health insurance premiums. Under Section 80D of the Income Tax Act, 1961, an individual can claim a tax benefit up to INR 25,000 per year against the amount paid as health policy premiums. The tax deduction also applies to policies purchased specifically to help individuals deal with the cost of treating coronavirus.

Things to Keep In Mind

While filing for a claim exemption, taxpayers must remember to be honest. The IT department will investigate all claims. If they find any inconsistencies, they can levy a fine. People should make themselves aware of all the terms and conditions of the income tax benefits and make claims and deductions accordingly.

The coronavirus pandemic created a lot of turmoil in our lives. Thankfully, there appears to be a light at the end of the tunnel. Many people are receiving treatment and vaccines that can help stop the spread of the virus. The new rules laid out by the CBDT also provides financial aid to those who need it the most.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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