Salem, 27 June 2021
A positive step was taken by the central government on 26 th June 2021 facilitating the tax
exemption of amounts received for COVID-19 treatment by employees who are taxpayers
from their employers or any well-wishers. After this announcement, tax practitioners have
been pouring in suggestions to ensure different categories of people are benefitted. Senior
citizens who do not have an employer to support and/or living off pensions will be the
primary beneficiaries if such exemptions are provided for COVID-19 treatment expenses
made out of their pockets. Employees with a limited income can greatly benefit from this
exemption if their employers or well-wishers directly pay the hospital bills. However, if the
amount is transferred to the employees’ accounts, it would create confusion during the
assessment. The former case would qualify as exemption but the latter might show higher
than the normal income of the taxpayers, causing them an excess burden. Moreover, the taxpayers
can only claim a deduction of up to Rs. 25,000 (Rs. 50,000 for senior citizens) under section
80D of the Income Tax Act for the payment of their own bills. This is a problem that needs to
be addressed before the notification of the tax break is issued since COVID-19 treatment is
very expensive, running into lakhs of rupees. The practitioners have requested the
government to provide all required details and include the tax break availability for medical
bills paid in cash as well.
Written by Sasmitha Kumaravadivel
Research Intern, Sasmitha Kumaravadivel