Income tax exempted on employee's Covid treatment

The government on Friday extended the deadlines for various income tax compliances and said the amount paid by an employer to employees for Covid-19 treatment would be tax exempt.

Also, ex-gratia payments received from employers by family members in case of employees' death due to COVID would be exempt from income tax in fiscal 2019-20 and subsequent years.

The limit for such tax-exempted payment would be Rs 10 lakh in case it is received from any other person.

"In view of the impact of the Covid-19 pandemic, taxpayers are facing inconvenience in meeting certain tax compliances and also in filing response to various notices.

"In order to ease the compliance burden of taxpayers during this difficult time, reliefs are being provided...," the Central Board of Direct Taxes (CBDT) said in a statement.

The tax department said many taxpayers have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of COVID-19.

"In order to ensure that no income tax liability arises on this account, it has been decided to provide income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of Covid-19 during FY 2019-20 and subsequent years," it added.

In case of taxing capital gains arising out of transfer of residential house property, the CBDT said for relief in taxation, the re-investment deadline would be September 3, 2021 for such capital gains.

Section 54 of the Income Tax Act provides that in case there is capital gain on account of transfer of a residential house property, such capital gain can be exempt from tax if the taxpayer invests the capital gain amount into another house property within 2 years (in case of purchase of new house) or within 3 years (in case of construction of a house) from date of transfer of original house property.

The CBDT circular now provides that in case any such time period of 2 / 3 years is expiring between April 1, 2021 to September 29, 2021, it will be extended to September 30, 2021.

Besides, the deadline for making payments under the Vivad Se Vishwas direct tax dispute resolution scheme has been extended by two months till August 31.

However, taxpayers have the option to make payments till October 31 with an additional amount of interest.

The last date for PAN-Aadhaar linking too has been extended by three months to September 30, 2021, while the same for furnishing Tax Deducted at Source (TDS) certificate in Form 16 to the employees by employers has been extended till July 31, from July 15, 2021.

The due date for furnishing TDS statement for the last (January-March) quarter of the 2020-21 has been extended to July 15, from June 30, 2021.

The quarterly statement in Form 15CC to be furnished by an authorised dealer for remittances made for the June quarter would have to furnished by July 31.

Also, the deadline for furnishing Equalisation Levy Statement in Form No. 1 for the financial year 2020-21, has been extended by a month till July 31, 2021, while for processing Equalisation Levy returns, the time limit has been extended by 3 months till September 30, 2021.

Commenting on the measures, Nangia & Co LLP Partner Shailesh Kumar said this would give much needed tax relief to taxpayers, who have received monetary help from their employer, friends and extended families, either for treatment of COVID-19 or on account of death of a family member from the coronavirus infection.

"Though the relief is granted retrospectively from FY 2019-20 onwards, since the due date for filing ITR for FY 2019-20 has already expired, it would be important to see whether the government revives the time limit for filing ITR for FY 2019-20," Kumar added.

The extension of various due dates, be it for PAN-Aadhaar linking, payment of tax/ penalty under Vivad se Vishwas scheme, completion of assessment proceedings, completion of penalty proceedings, registration of charitable trusts and institutions for income tax exemption etc, will provide additional time, both to taxpayers as well as tax authorities, he added.