More I-T relief sought for COVID-19 bills

Accountants call for tax breaks to those footing their own medical expenses, especially senior citizens

Tax practitioners have urged the government to consider some tax relief for those who footed their own COVID-19 bills, particularly senior citizens, even as they await the fine print on the Income Tax exemption announced for all such treatment costs funded with the help of employers and well-wishers.

On Friday, the Centre promised legislative changes to the Income Tax Act to exempt any amounts received by a taxpayer for COVID-19 medical treatment retrospectively from 2019-20.

“If an employer or a well-wisher paid a person’s hospital bills directly, then the treatment costs are not taxable for the patient in any case,” said Gautam Nayak, partner at CNK & Associates LLP. “This exemption will help those whose taxable incomes may not be very high, but their accounts would have shown higher receipts if employers or others remitted funds to them to help meet medical costs,” Mr. Nayak added.

Delhi-based chartered accountant Geetanshu Bhalla said one would have to wait for the notification of the tax break to assess its impact, particularly as the word ‘well-wisher’ mentioned in the press note does not figure in the tax law.

The exemption also won’t benefit those who may have pooled funds together informally to help meet the medical costs of needy persons, he pointed out, as the pooled corpus would be treated as a gift from unrelated parties and taxed in the hands of the person who coordinated the funding.

Mr. Bhalla also called for a rethink on the deduction provision for taxpayers who tapped their own savings to meet healthcare costs.

‘Inequitable situation’

“We have a slightly odd and perhaps inequitable situation now, whereby all financial aid from employers or other persons for treatment is tax-free, while taxpayers who paid their own bills can only claim a deduction up to ₹25,000 under section 80D of the IT Act, with senior citizens allowed ₹50,000,” he said.

“Anecdotal evidence suggests COVID-19 treatment costs can often run into lakhs of rupees, so these thresholds are quite inadequate,” he added. Senior citizens who do not have an employer to fall back on and are living off pensions and interest income could in fact find it particularly difficult.

Separately, while the government has temporarily allowed cash payments of more than ₹2 lakh for COVID-19 patients, section 80D deductions are only permissible for medical expenditure incurred in non-cash mode. In the absence of requisite changes to the provision, no tax break could be availed for medical bills paid in cash, accountants noted.

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