Continuing with its pandemic relief initiatives, the government may extend income tax deduction benefits for Covid-19 treatment to individuals not covered under any health insurance.

Sources said that several pre-budget proposals for providing tax relief for Covid-19 treatment have come to the Revenue Department and these are being actively examined. If the proposal is accepted, it may form part of budget proposals for 2021-22, they added.

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Currently, few deductions have been prescribed under Chapter VI-A of the Income Tax Act, 1961 for medical treatment for self or dependent suffering from disability/severe disability (Sections 80DD, 80U), and medical treatment of prescribed diseases and ailments (Section 80DDB). However, there is no specific deduction under the Act which covers treatment cost for Covid-19 patients who are not covered under any health insurance.

The proposal that is now being considered is to include expenses made on Covid-19 treatment under the prescribed diseases category as per Section 80DDB and therefore, qualify such expenditure for getting income tax deduction benefits.

Interestingly, donation made to PM CARES fund designed specifically for providing Covid-19 relief is currently eligible for 100 per cent deduction under Section 80G of the Act, but no corresponding deduction has been notified for expenses incurred on treatment of the disease itself.

“Given the substantial cost involved in Covid-19 treatment in Government or private hospitals, a separate deduction capped up to Rs 1,00,000 or actual treatment cost incurred by the taxpayer for self or family, whichever is lower, may be considered to be introduced under the Act to provide much-needed relief to the taxpayers specially when such costs are not covered under a health insurance policy,” said Parizad Sirwalla, partner and head, global mobility services-tax, KPMG Assurance and Consulting LLP India.

The inclusion of Covid-19 treatment for tax deduction would bring big benefits to individuals and their families who are not covered under any health insurance plan but still face this unwanted additional financial burden from the pandemic. Even with health insurance, several policies have not included cover for Covid-19 treatment. Such individuals would also benefit from I-T deduction if it is made available.