Considering how the pandemic has played hide and seek in the last 24 months with increasing cases of people struggling with mental health issues, the government has rolled out a National TeleMental Health Program to provide better access to quality mental health counselling and care services.
The program includes a network of 23 tele-mental health centres of excellence, with a nodal centre and International Institute of Information Technology (Bangalore) providing technological support.
If you are based out of any remote location and struggling with mental health issues, these centers offer immediate access to counseling over a phone call. Generally these services are accessible through a private network of practitioners, with counselling charges as high as Rs 500 to Rs 5,000 per hour, depending on the experience and expertise of the counsellor in question.
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National Digital Health Ecosystem: How does it affect your pocket?
The budget also talked about the launch of the National Digital Health Ecosystem, consisting of digital registries of health providers and health facilities, offering universal access to health facilities. Since the pandemic, the government has noted an 80% rise in the consumption of digital healthcare services. People are expected to continue embracing digital healthcare solutions and services in the post-pandemic era.
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To ensure robust governance around these new trends on the healthcare side, the government has now created a framework for tax exemptions around such medical treatments.
What are the new tax exemptions?
If you have received or do receive any money from your employer or any other person during Financial Year 2019-20 and onwards, to the extent of the actual expense incurred to treat COVID-19 illness for yourself or your family, the amount will not be considered as taxable income.
Also, if an employee dies due to COVID-19 illness, the entire amount the family receives from the employer, would be exempted from tax in the hands of the recipient family member.
Further, if the bereaved family member receives any amount from any other well-wisher, the exemption amount is limited to Rs 10 lakh here. In both these cases, the amount should be received within 12 months from the date of death and subject to certain conditions being fulfilled as would be notified by the Central Government.
The family includes the spouse and children of the individual, parents, brothers, and sisters, wholly or mainly dependent on the individual.
Case 1: Employer pays/reimburses expense incurred on Covid treatment for self or/and family: Mr. Ram, a salaried employee of a private limited company, and his mother were diagnosed with COVID-19. He incurred an expense of INR 5.6 Lakhs due to hospitalisation. Mr. Ram’s employer reimburses the entire costs of their medical treatment for COVID-19 illness.
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Effect of the proposed amendment: The amount received from his employer would not be taxable in the hands of Mr. Ram. If Mr. Ram receives the amount of INR 5.6 lakhs from a well-wisher or a trust, the amount continues to be tax exempt.
However, the tax exemptions are subject to certain conditions yet to be notified by the Central Government.
Case 2: Ex-gratia relief received on death of a person by a member of the family:
1. From the employer of the deceased: Continuing with the above example, where Mr. Ram, unfortunately, succumbs to COVID-19, his employer decides to provide a sum of Rs 25 lakhs as a relief to his mother.
Effect of proposed amendment: The sum received by late Ram’s mother would also not be taxable.
2. From any other person: In case where a well-wisher or trust decides to provide some financial assistance to the family and transfers INR 15 Lakhs to the family,
Effect of proposed amendment: The sum to the extent of INR 10 Lakhs shall not be considered taxable income in the hands of late Ram’s mother. However, the sum of INR 5 lakhs shall be considered taxable as income from other sources in the hands of late Ram’s mother.
The above Case 2, however, is subject to the condition that the ex-gratia amount is given to a member of the family (in this case, late Ram’s mother) within 12 months from the date of Ram’s death and certain additional conditions yet to be notified by the Central Government. The essence of the amendments proposed above has been captured in the table below:
Further clarifications are awaited from the government on the exact conditions required to be met to claim tax exemption. Also, it would be interesting to understand the expenses that would be covered, like ventilator charges, hospital room rents, medical expenses etc.
The Indirect Impact
From an indirect taxes perspective, certain medical services will become costlier due to withdrawal of and increase in effective customs duty. Custom exemption available for artificial kidney, disposable sterilized dialyzer, micro-barrier of artificial kidney and the parts used in manufacturing these products will be withdrawn. These products will now attract basic customs duty at the applicable rates. Further, basic customs duty applicable on parts used in X-ray machines for medical, surgical, dental or veterinary purposes has been increased from 5%/7.5% to 10%. Hence these are also likely to become costly to this extent.
(This post-Budget 2022 analysis has been done by Grant Thornton Bharat)