COVID-19 victims' kin can't avail IT benefits without specific death certificates after Act amended

As if the pain and anguish of losing their loved ones, sometimes the only breadwinners of their homes, to COVID-19 was not enough, families trying to avail of the income tax relief that had been provided on any amount received by an employee from the employer or any well-wisher now have to make sure that the death was attributed to the disease officially in the death certificate.

While the need for producing documentary proof is understandable, families suddenly find amendments made to the Finance Act 2022 reminding them of the time when their loved ones perished due to COVID-19, but the doctor’s report of the deaths often cited reasons like cardiac arrest or some other co-morbidity.

Most families had not made much of the cause of death on paper, till the amendments presented themselves as another element of pain.

Nikhil Ahuja, a student from Kalyan, lost his father to COVID-19, but his death certificate does not mention the virus having caused the death. “My father’s death has been recorded as that due to acute respiratory failure. Given that he was the only major earning member of our family, many of his colleagues, the employer of his private firm, and others chipped in to help. But now we are in a fix while trying to avail of tax exemptions by submitting the documents that we have,” he says.

The Ahuja family is not alone in facing this situation. Some families did not receive such assistance within 12 months of the death and now cannot claim exemption. As per the amendments to the Finance Act 2022, family members of COVID-19 victims who received an ex-gratia payment from the deceased’s employer, or financial assistance from relatives, need to submit a form and provide specific evidence to get these tax exemptions.

“The notification requires the recipients of such ex-gratia amounts to file information in Form A within nine months of the financial year of receiving the amount or till 31 December 2022, whichever is later. Also, the family is required to retain the relevant reports relating to the person being determined as COVID-19 positive as well as a death certificate calling out the reason for death as COVID-19," Saraswathi Kasturirangan, Partner, Deloitte India said.

According to these amendments made to the Finance Act, 2022, and notified on August 5, such ex-gratia payment from the employer will not be treated as a perquisite under the Income-Tax (I-T) Act, 1961.

When the pandemic affected many human lives and caused significant stress on healthcare services, fellow employees, and employers stepped in to provide financial support to families of employees who died, by way of ex-gratia compensation to family members as financial support either by way of lump sum payment or spread over a period.

“Such were the times that not only employers but also many others closely associated persons like relatives, friends, colleagues, etc. provided similar financial support to individuals adversely impacted by COVID-19,” said Dr. Mangala Gomare, executive health officer with Brihanamumbai Municipal Corporation.

Families also received financial support in other ways like meeting the cost of children’s education, medical insurance, reimbursement of medical expenses, etc.

While the entire amount paid by employers is exempt, similar financial support extended by closely associated persons like relatives, friends, colleagues, and others is exempt up to Rs. 10 lakh.