490969 SIP myths you must know!

The Union Finance Ministry has taken a laudable step by taking the decision that money credited to the account of an individual for the treatment of Covid would not be taxed. The amount can be limitless if the fund has flowed in from the employer and would be capped at Rs 10 lakh if has come from a well-wisher. The decision would be applicable from FY20 and for subsequent years.

Till June 24, the country had as many as 3.01 crore Covid patients and the number is rising every day. Obviously, it would be of great help to the common man. If someone has suffered the disease and paid a hefty amount for treatment, paying taxes on the assistance would have been cruel to say the least.

However, there are two things the government has to guard against. One, at an operational level, the measure might involve certification of expenditure. Everyone might not have been admitted to a hospital — acute shortage of beds was one of the key complaints across the country — and substantial expenditure might have taken place at home on different items such as consultation of doctors, purchase of oxygen cylinders, medical devices, medicines and consumables.

Two, after Friday’s announcement of tax exemption, some individuals might take money from friends, relatives and associates for treatment and claim tax exemption on the amount, even if they are perfectly capable of bearing the expenditure themselves. They can easily return the money without leaving any record anywhere. Since the announcement has not announced tax exemption on Covid treatment that one pays out of one’s own pocket, some might use this route to dodge the taxman.

That would be a sad abuse of a well-intentioned step to extend a helping hand at the time of distress. But the administration cannot afford to be naïve. It has to guard against such flagrant abuse.