Taxpayers are facing multiple challenges in meeting certain tax compliances due to the resurgence of COVID-19. To make it easy for them, the government announced relief measures by extending compliance timelines and providing tax exemptions in some instances.

Let’s take a closer look at these relief measures by the income tax (IT) department:

1. Tax exemption to employees

Many employers have given financial support to their employees by bearing their COVID-19 treatment expenses. The IT department has provided an income tax exemption on the amount received from the employer towards the COVID-19 treatment.

Tax relief is also available for those taxpayers who have received financial assistance from any other individual.

The treatment expenses from FY 2019-20 and onwards are allowed for such tax relief.

On 5th August 2022, the government notified the conditions for claiming the tax exemption mentioned above. The employees should submit the following documents to the employer:

  • Medical reports that determines the employee or the family member were suffering from COVID-19.
  • All necessary documents of medical diagnosis or treatment of the employee or the family member for COVID-19 suffered within six months from the date of being determined as COVID-19 positive.
  • A certificate of the expenditure incurred on the COVID-19 treatment of the individual or the family member. A statement must be furnished in Form no. 1 declaring the amount received from any person,the details of the medical diagnosis, and the amount of expenditure incurred.
  • Form no. 1 must be submitted within nine months to the IT department from the end of the FY or 31st December 2022, whichever is later.

2. Tax exemption to family members of the taxpayer

During the pandemic, several people lost their lives. Employers and well-wishers of such taxpayers have provided financial aid to their family members to help them cope with the financial challenges resulting from the untimely loss of an earning member.

Therefore, to reduce the tax burden, the income tax department allows exemption (under Section 56 of the Income Tax Act) on amounts received by the family.

However, the exemption limit depends on who gave the money to the taxpayer’s family. If the family receives an amount from the taxpayer’s employer, the ex-gratia payment shall be fully exempt without any limit. The exemption is restricted to Rs 10 lakh if any other person makes such an ex-gratia payment. The tax relief is available for ex-gratia payments after FY 2019-20.

On 5th August 2022, the government notified the below conditions for claiming the tax exemption mentioned above:

  • The family members must submit a Form A to the income tax department
  • Form A must be submitted before nine months of the end of the FY in which the amount is received or 31st December 2022, whichever date is later
  • The death of the individual should be within six months of the date of testing positive
  • The family member should retain a record of reports determining the individual as COVID-19 positive and the death certificate

3. Aadhaar-PAN linking

The government extends Aadhaar-PAN linking due date by three months. One can now link their Aadhaar with PAN by 30th September 2021. The government has made it mandatory to link Aadhaar with PAN to file income tax returns.

4. Compliances for availing capital gains tax exemption

To avail exemption under Section 54 to 54GB, the taxpayer must complete specific tasks within the deadline. For example, purchase or construction of the property, capital gains bonds investment, the deposit of money, or other action required to avail exemption under given sections.

The timelines falling between 1st April 2021 and 29th September 2021 stands extended to 30th September 2021.

5. Payment under the Vivad se Vishwas scheme

The last date of payment of the amount, i.e. without additional amount, under Vivad se Vishwas scheme, is extended to 31st August 2021. Previously, the due date was 30th June 2021. 

Furthermore, the last date for the payments, with the additional amount, under Vivad se Vishwas scheme is 31st October 2021.

Apart from these important announcements, the income tax department has extended certain timelines previously vide circular no. 09/2021. Some of the important due dates related to FY 2020-21 extended were as follows:

  • Filing of the income tax return by taxpayers whose accounts are not required to be audited – 30th September 2021.
  • Filing of the income tax return by taxpayers liable for tax audit – 30th November 2021.
  • Filing of a belated and revised return – 31st January 2022.
  • Furnishing of the tax audit report -31st October 2021

The timelines that are extended by the CBDT will offer relief to the taxpayers amidst partial lockdowns in many states.

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