Exemption of amount received for medical treatment and on account of death due to COVID-19
Clause (x) of sub-section (2) of section 56 of the Income-tax Act, 1961 (the Act) inter alia, provides that where any person receives, in any previous year, from any person or persons any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum shall be the income of the person receiving such sum. However, certain exceptions have been provided in the clause for transaction specified therein.
2. Clause (2) of section 17 of the Act, inter alia, provides the definition of “perquisite”. However, certain exceptions have been provided which shall not include as perquisites.
3. The Finance Ministry has released a press statement dated: 25.06.2021 where it was announced that income-tax shall not be charged on 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 was further announced that in order to provide relief to the family members of such taxpayer, income-tax exemption shall be provided to ex-gratia payment received by family members of a person from the employer of such person or from other person on the death of the person on account of COVID-19 during FY 2019-20 and subsequent years. Also, it was stated that the exemption shall be allowed without any limit for the amount received from the employer and the exemption shall be limited to Rs. 10 lakh in aggregate for the amount received from any other persons.
4. In order to provide the relief as stated in the press statement, it is proposed to amend clause (2) of section 17 and to insert a new sub-clause in the proviso to state that any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 subject to such conditions, as may be notified by the Central Government, shall not be forming part of “perquisite”.
5. Further, it is proposed to amend the proviso to Clause (x) of sub-section (2) of section 56 and insert two new clauses in the proviso so as to provide that-
(i) any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family, in respect of any illness related to COVID-19 subject to such conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person;
(ii) any sum of money received by a member of the family of a deceased person, from the employer of the deceased person (without limit), or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed ten lakh rupees, where the cause of death of such person is illness relating to COVID-19 and the payment is, received within twelve months from the date of death of such person, and subject to such other conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person.
6. Further, it is proposed to provide that for the purpose of both of the said clauses, “family” in relation to an individual shall have the same meaning as assigned to in the Explanation 1 to clause (5) of section 10.
7. These amendments will take effect retrospectively from 1st April, 2020 and will accordingly apply in relation to the assessment year 2020-21 and subsequent assessment years.
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Note on Clause 10 and 16 of Finance Bill 2022
Clause 10 seeks to amend section 17 of the Income-tax Act relating to definition of “salary”, “perquisite” and “profits in lieu of salary”.
Clause (2) of the said section, inter alia, provides the definition of the term “perquisite” and proviso to the said clause provides certain exclusions which shall not be part of “perquisite”.
Clause (ii) of the said proviso provides that any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in certain specified cases shall not be part of perquisite.
It is proposed to amend the said clause (ii) to insert a new sub-clause to provide that any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 subject to such conditions, as may be notified by the Central Government in this behalf, shall not be forming part of “perquisite”.
This amendment will take effect retrospectively from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
Clause 16 seeks to amend section 56 of the Income-tax Act relating to income from other sources.
Sub-section (2) of the said section provides that certain incomes as provided therein shall be chargeable to income-tax under the head “Income from other sources” without prejudice to the generality of the provisions of sub-section (1) thereof.
Clause (viib) of the said-sub-section provides that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable under the head of Income-from other sources.
The first proviso to said clause (viib) provides that the provisions of the said clause shall not apply, where the consideration for issue of shares is received by a venture capital undertaking from, inter-alia, a specified fund.
Explanation to the said clause provides the definition of “specified fund” as a Category I or a Category II Alternative Investment Fund which is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992.
It is proposed to amend the said Explanation to clause (viib) to provide that “specified fund” shall also include Category I or a Category II Alternative Investment Fund which is regulated under the International Financial Services Centres Authority Act, 2019.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
The existing provisions of clause (x) of sub-section (2) of the said section of the Income-tax Act, 1961 (the Act) inter alia, provides that where any person receives, in any previous year, from any person or persons any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum shall be the income of the person receiving such sum.
Proviso to the said clause provides for certain exclusions which shall not be part of the income specified in the clause.
It is proposed to amend the said proviso to insert two new clauses (XII) and (XIII) so as to provide that–
(i) any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family, in respect of any illness related to COVID-19 subject to such conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person;
(ii) any sum of money received by a member of the family of a deceased person, from the employer of the deceased person, or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed ten lakh rupees,
where the cause of death of such person is illness relating to COVID-19 and the payment is, received within twelve months from the date of death of such person, and subject to such other conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person.
It is also proposed to insert an Explanation to provide that for the purpose of both of the said clauses (XII) and (XIII) of this proviso, “family” in relation to an individual shall have the same meaning as assigned to in the Explanation 1 to clause (5) of section 10.
This amendment will take effect retrospectively from 1st April, 2020 and shall accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
Explanation to clause (x) of the said sub-section provides that for the purposes of the said clause, the expressions “assessable”, “fair market value”, “jewellery”, “property”, “relative” and “stamp duty value shall have the same meanings as respectively assigned to them in the Explanation to clause (vii).
It is proposed to amend the said Explanation to include the definition of the expression “property” to have the same meaning as assigned to it in clause (d) of the Explanation to clause (vii) and shall include virtual digital asset.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
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Extract of Clause 10 and 16 of Finance Bill 2022
10. Amendment of section 17.
In section 17 of the Income-tax Act, in clause (2), in the first proviso, in clause (ii), after sub-clause (b), the following sub-clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2020, namely:––
“(c) in respect of any illness relating to COVID-19 subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf:”.
16. Amendment of section 56.
In section 56 of the Income-tax Act, in sub-section (2),––
(a) in clause (viib), in the Explanation, in clause (aa), after the words and figures “Securities and Exchange Board of India Act, 1992”, the words and figures “or regulated under the International Financial Services Centres Authority Act, 2019” shall be inserted with effect from the 1st day of April, 2023;
(b) in clause (x),––
(i) in the proviso occurring after item (B) in sub-clause (c), after clause (XI) and before the Explanation, the following clauses shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2020, namely:––
‘(XII) by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family, for any illness related to COVID-19 subject to such conditions, as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(XIII) by a member of the family of a deceased person––
(A) from the employer of the deceased person; or
(B) from any other person or persons to the extent that such sum or aggregate of such sums does not exceed ten lakh rupees, where the cause of death of such person is illness related to COVID-19 and the payment is––
(i) received within twelve months from the date of death of such person; and
(ii) subject to such other conditions, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Explanation.––For the purposes of clauses (XII) and (XIII) of this proviso, “family”, in relation to an individual, shall have the same meaning as assigned to it in Explanation 1 to clause (5) of section 10.’;
(ii) for the Explanation, the following Explanation shall be substituted with effect from the 1st day of April, 2023, namely:––
‘Explanation.––For the purposes of this clause,––
(a) the expressions “assessable”, “fair market value”, “jewellery”, “relative” and “stamp duty value” shall have the same meanings as respectively assigned to them in the Explanation to clause (vii); and
(b) the expression “property” shall have the same meaning as assigned to it in clause (d) of the Explanation to clause (vii) and shall include virtual digital asset.’.
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