CBDT notifies condition for claiming tax exemption for receiving ex-gratia amount due to Covid 19

Any family receiving ex-gratia amount on account of death of a family member due to Covid 19 from his employer or other person will be able to claim exemption only if the death was within a period of six months from his testing positive.

Death certificate furnished must clearly mention the cause of death as Covid 19, according to the latest conditions notified by the Central Board of Direct Taxes on Saturday for availing income tax concessions announced after the pandemic outbreak.

The clarification comes about a week after the last date for filing income tax return for Financial year 2021-22.

As per the notification, such family members are required to submit a form called ‘Form A’ to the assessing officer.

“The notification requires the recipients of such ex-gratia amounts to file information in Form A within nine months of the financial year of receiving the amount or until 31 December 2022, whichever is later,” said Saraswathi Kasturirangan, Partner, Deloitte India.

Also the family is required to retain the relevant reports relating to the person being determined as Covid positive as well as death certificate clearly calling out the reason for death as Covid 19.

“The family member of the individual shall keep a record of the following documents, medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that the death of the person is related to corona virus disease ( COVID-19),” the notification said.

The government had announced last June that many taxpayers, who have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of Covid-1 or received ex-gratia from their employers or relatives will be tax exempt during FY 2019 -20 and subsequent years.

While the entire amount is tax exempt if received from the employer, the exemption is limited to an aggregate of Rs. 10 Lakhs if received from others.

Experts say that terms and conditions, which came a week after filing income tax return, would create unnecessary confusion.

According to Sandeep Sehgal, Partner-Tax, AKM Global, the time to file the revised and belated returns for AY 20-21 and AY 21-22 was already over. Although, the exemption was introduced in the Finance Act, 2022 the conditions have been prescribed now, which also includes maintaining certain documents.

“The taxpayers who have token exemptions may not have appropriate documentation asked for. They can withdraw the claim by filing an updated return but it will involve payment of additional penalty, which may not be justified in such cases,” Sehgal adds.

Experts also pointed out that although many people died of Covid, in many cases the cause of death was cited as cardiac arrest.

They said the latest condition will exclude a large number of people from claiming exemption even though their family member died of Covid.

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