Is your Covid-19 treatment crowdfunded? Know the tax implications here

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The larger impact of the second wave of Covid-19remains under assessment, however, its footprints have left most people emotionally, physically, and financially drained. To lessen this burden for those incapable of paying off the expensive hospital bills, several crowdfunding organisations came forward to pool in donations and help ease the financial situation of the needy.

Key organisations involved in crowdfunding for Covid relief in India include the likes of Milap, Ketto and Give India.

However, you must realise that such extended financial help may come with certain tax implications.

“If you have received any donations for health treatment then the same shall be considered a gift in the hands of the assessee and shall be taxable if the amount is more than Rs 50,000 (i.e. taxpayer has received gifts worth more than Rs 50,000),” Gauri Chadha, a tax expert, said.

Any donation received in the form of ‘financial help’ would be added to the total income of the recipient and taxed as per the current income tax slabs. This is applicable only when the total taxable income of the recipient/taxpayer is above the basic exemption limit.

Meanwhile, there are certain exemptions to this rule that one must be aware of. For example, if the NGO/charitable organisation arranging your funds is duly registered with the Income Tax Department, the donations received by you won’t be taxable even if they are above the limit of Rs 50,000. This also means that one should do a background check of the crowdfunding organisation before opting for financial help.

Apart from this, the taxability of any donation depends on two key parameters – type and mode. Any financial help becomes taxable only when the amount is above Rs 50,000 and is strictly a sum of money or immovable property. A total of 9 types of property including shares, securities, jewellery, artwork, etc. comes under direct taxation.

But if the donation/financial aid is in some other form, i.e., apart from what is mentioned in the tax law, then it will not be counted for taxation. If you have received, say, medicines or oxygen cylinders for Covid treatment – this cannot be taxed.

“In case a charitable organisation (registered with the Income Tax Dep.) or anyone for that matter directly pays the hospital bill for a patient, it will not be taxed. This is because it’s not a sum of money or property mentioned under the tax law,” Chadha explained.

But if the money for the same hospital bill is transferred to the recipient’s bank account, it becomes taxable for the latter.

It is also critical to note that if your employer helps you financially for Covid treatment, it will be taxed too.

“In case you receive any amount from your employer the same will form part of your salary and shall be taxable in full. Earlier medical reimbursements were given certain rebates but the same has now been replaced with the standard deduction,” Chadha pointed.

Does this limit of Rs 50,000 also apply if a relative or a family member helps?

Generally, gifts and loans (with or without interest) from family members are tax-free. “But gifts above Rs 50,000 from a non-relative that is anyone who falls outside the definition of ‘family’ under the Income Tax Act becomes taxable for that financial year,” Chadha added.

As per the IT Act, your spouse, brother or sister, spouse’s brother or sister, brother or sister of either of the parents, your spouse’s or your lineal descendent and ascendant, and brother’s or sister’s spouse come under ‘family’.