Monetary assistance and other support provided by the industry to the employees and society at large for COVID-19 care related expenses
– Request for exemption from Income-tax in hands of recipients and business expense deduction for industry
The second wave of COVID-19 pandemic in India has been more severe and devastating than the first wave, affecting many more human lives and causing significant stress on the healthcare services. In the words of the Hon’ble Prime Minister, it is a storm which has shaken the nation.
Whilst both Central and State Governments are doing their best to tide over the crisis, the challenge is humongous, and all stakeholders have stepped forward to provide every possible support to the affected people. The corporate sector has remained committed to supporting the Government in this fight. It has extended itself in many ways in providing assistance to the society.
Businesses are complementing government endeavours in fighting the pandemic, by providing essential and life survival items such as medical oxygen, oxygen concentrators, ventilators, setting up Covid care centres, free meals, accommodation to frontline workers, etc.
Besides contributing to the society at large, businesses have been actively taking care of their employees across all levels, and their immediate family members, to protect lives and livelihoods. The employer(s) have stepped in to provide financial support to employees to meet COVID-19 care related expenses actually incurred by the employee for self and for his / her immediate family or ex-gratia compensation to family of deceased employee. To the extent support is provided by the employers, the burden on the Government is reduced.
However, the initiative of the employer or other persons, by providing monetary assistance and other support to the employees to meet COVID 19 care related expenses could result in unintended tax burden on the employees and reduce the much needed aid that is required at this critical stage. This is because the current provisions of the Income-tax Act, 1961 have very restrictive exemptions for such assistance.
Given the unprecedented, extraordinary circumstances and genuine hardship faced by the employees and their immediate family members, it is humbly submitted that tax relief may be provided to the individuals by providing an exemption from Income-tax on various forms of COVID 19 support received from employers and other persons. We also take this opportunity to reiterate our representation to allow full deduction for any direct expenditure incurred towards combating COVID 19 crisis, while computing taxable income for the year in which such expenditure is incurred regardless of whether such expenditure is classified as Corporate Social Responsibility (CSR) expense for the purposes of Companies Act 2013.
A detailed note on the taxation difficulties faced by employers and employees and our representations for tax relief is enclosed herewith for your kind consideration.
We trust our concerns and suggestions shall be favourably considered. Your immediate intervention to provide this tax relief will provide much needed impetus to the efforts of the industry to stand by with their employees in this hour of need. The support from the employers will also supplement, in some measure, the Government’s efforts.