In his speech on May 12, 2020, Prime Minister Narendra Modi coined the term ‘Aatmanirbhar Bharat’ (self-reliant India) and launched the Aatmanirbhar Bharat Abhiyan. What came to pass, instead, was not Aatmanirbhar Bharat but Aatmanirbhar Bharatiya (self-reliant Indian), as each Indian was left to fend for himself or herself.
A boy walks past graffiti, amid the spread of COVID-19, on a street in New Delhi, March 22, 2021. Photo: Reuters/Anushree Fadnavis
Ministers of various Bharatiya Janata Party (BJP) governments, both at the Centre and in states, responded to the crisis by constantly proclaiming that everything was going well and publicly patting themselves on the back for every relief measure, no matter how small, they undertook. It conjured up the image of the chowkidar (security guard) in the story told by Phunsuk Wangdu (Aamir Khan) in the movie Three Idiots who shouted “Aal is well” all night, though he suffered from night blindness and had no clue what was actually going on.
So, while Indians ran around day and night looking for life-saving medicines, oxygen cylinders and concentrators and finally hospital beds, often sourcing them at exorbitant prices in the black market, those who we have elected to power, blinded by their arrogance, constantly proclaimed that all was well. Money, power and the who-do-you-know variety of influence which gets the middle class in India all of its small privileges – from cooking gas cylinders to school admissions – were reduced to nothing as people begged for an ICU bed or an oxygen cylinder in return for their life’s savings, and often returned disappointed.
Whether or not people will remember these soul-crushing experiences next time they step into a polling booth, only time will tell. That is not what this article is about.
What this article is, in fact, about, is that today, the aatmanirbhar Bharatiya has over the course of the last financial year 2020-21 (and so far during the current fiscal year) incurred unprecedented medical expenses to procure supplies and services that it was incumbent on the government to provide them. This is unlikely to change in the months to come. What is in the past cannot be undone. The lives lost cannot be redeemed and the suffering undergone cannot be wished away. Nor is it reasonable to demand that the hole that medical bills have blown into the bank account of the average Indian family be filled by the government. That credit balance will simply get added to the Rs 15 lakh that has already come into our accounts as our share of the black money returning home.
There is, however, one thing that can still be done, and, in fact, ought to have been done already. And that is making medical expenses, without any ceiling, a deductible expense for income tax purposes.
As anyone who has had to admit a family member in a hospital has realised, those who access medical services find themselves divided at the hospital reception itself into those who have health insurance and those who do not. Going by a recent report, only 8% of the country’s population was covered by insurers other than government schemes and an additional 0.26% were covered under the Central Government Health Scheme (CGHS). Those covered under the major government schemes i.e. Rashtriya Swasthya Bima Yojana available to below-poverty line (BPL) families and Employee State Insurance Scheme available to workmen of registered establishments earning less than Rs 21,000 per month, are not in the tax bracket, and are hence not relevant for purposes of this article, which is about income tax.
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Therefore, a large percentage of the population which does not have access to private health insurance or CGHS, would have found itself in great difficulty during this pandemic as they would be bearing the cost of testing and treatment from their own pocket.
And from my own experience, the blow to one’s pocket that COVID-19 deals is a heavy one that most Indian families would buckle under. Through most of 2020, each RT-PCR test to detect COVID-19 in the national capital, Delhi, cost Rs 2,400. This was reduced to Rs 1,200 around the end of the year for home testing and Rs 800 for lab tests. If you test positive, one or two follow-up RT-PCR tests are required subsequently to see if the infection has left your body, not to mention that each of your family members will need to be tested to see if they have contracted the infection from you.
Once you develop symptoms, the standard blood tests CRP, D-Dimer, IL-6 etc. will have to be conducted at least 2-3 times during the course of the disease to monitor its prognosis. The tests cost us Rs 6,000 each time for each patient for home testing, which was necessary since we were in home quarantine. Just an oximeter, which was not a household item before March last year costs Rs 2,000-3,000. And if during March-April this year, you were forced like me to rush out in the middle of the night in search of an oxygen cylinder, you would have discovered that a 10-15 litre oxygen cylinder, which costs Rs 7,000-9,000 under ordinary circumstances, was costing you anywhere between Rs 25,000 and Rs 50,000. Then, you would have realised that it was not possible to constantly refill cylinders and you would have purchased an oxygen concentrator, which, if you were lucky to find one, would have cost you anything between Rs 60,000 and Rs 1,25,000.
And finally, if the condition of your loved one degenerated, you were forced to join the scramble for hospital beds. If you were one of the lucky few to obtain a bed in time, you were in no position to ask, think or care about what the treatment would cost you. It was such a desperate time that no one was in a position to ask about rates, or to choose facilities on the basis of price. Any hospital bed anywhere within ambulance driving distance came as a lifeline and one could scarcely afford to ask questions about what the price of life was going to be. Heart-breaking stories emerged from across the country of people liquidating everything they had and borrowing money to clear hospital bills, often just so they could obtain the bodies of their loved ones from the hospital mortuary for their last rites.
By the very nature of the disease, COVID-19 seldom affects just one person in the family and there are any number of examples where several members of the same family had to be admitted to hospital one after the other or even simultaneously. Having spent over Rs 10 lakh in the last six months on medical expenses, as I sat down to compute my taxes for FY 2020-21, I was compelled to look up what the tax treatment of COVID-19-related medical expenses would be under the Income Tax Act, 1961. This is what I found.
Under Section 80D(2)(a) and (c) of the Income Tax Act, 1961, insurance premium and medical expenditure incurred by an assessee for themselves, their spouse and dependent children is allowed as a deduction from income up to a maximum of Rs 50,000. Under Section 80D(2)(b) and (d), the insurance premium and medical expenditure incurred for parents of the assessea is allowed up to a maximum of another Rs 50,000. What this means is that any expenditure on medical treatment over and above Rs 50,000 that you may have incurred under each head will be subject to income tax. As I mentioned, that limit of Rs 50,000 would probably have been exhausted with that first oxygen cylinder that you purchased in dire straits one night in March-April 2021. And mind you, these limits are for the entire family for the entire year.
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Let me try to explain this with some numbers. Say your father contracted COVID-19 and required hospitalisation and ICU care, and you had to incur an expenditure of Rs 2,00,000 towards his treatment. Thereafter, you mother too tested positive and had to be hospitalised, and you incurred expenses of another Rs 1,00,000 for her treatment. More of your family members tested positive and though they did not require hospitalisation, you had to purchase an oxygen concentrator for emergency use which cost Rs 60,000. You also incurred other expenses of another Rs 40,000 on their testing, treatment and recovery. Your total expenditure over the course of a few weeks on COVID-19 related medical expenses was therefore Rs 4,00,000.
In this case, Rs 1,00,000 (50+50) out of that amount will be exempted from taxation while the balance Rs 3,00,000 will be taxed at the rate applicable to your tax bracket. So, if your annual income is more than Rs 15 lakh, then you’ll be paying 30% of Rs 3,00,000 i.e. Rs 90,000 more as income tax to the exchequer on money that you’ve already spent on treatment that the government failed to provide you. I like to call this the Aatmanirbharta Tax. Just like we pay money to a swimming instructor for throwing us into the deep end of the pool so that we can teach ourselves how to swim to save our lives, Aatmanirbharta Tax is the tax we must pay the government for teaching us to be self-reliant in the face of adversity.
Section 80DDB of the Income Tax Act is another provision that provides an additional deduction up to Rs 40,000 for medical expenses incurred for the assessee, their spouse, children, parents or siblings, which limit goes up to Rs 1,00,000 if the medical expenses are incurred for the parent(s) of the assessee. However, Section 80DDB is limited only to certain specific diseases enumerated in Rule 11DD of the Income Tax Rules, 1962, which include cancer, AIDS, chronic renal failure and Parkinson’s Disease, among others. The reasoning seems to be that because of the onerous and expensive ongoing cost incurred in treatment of these diseases, a separate limit has been prescribed for them so that the limits in Section 80D(2)(c) and (d) may remain available for sundry other diseases.
However, the list of diseases in Rule 11DD has not been amended to include COVID-19. Although it was widely reported that a proposal for inclusion of COVID-19 in the list was being considered prior to this year’s Budget, no specific provision for COVID-19 related medical expenses found its way into in the Finance Act, 2021. Would the finance minister care to explain why this proposal was not found worthy of acceptance?
Just by way of contrast, a donation made to the PM-CARES Fund, which we were told has been specifically created for the purpose of “strengthening the fight against COVID-19” and to “further availability of quality treatment”, is eligible for 100% deduction under Section 80G of the Income Tax Act. The Prime Minister’s Office aka PMO has refused to disclose any details about the PM-CARES Fund under the Right to Information Act, 2005 and the Delhi high court has not yet decided a PIL in which it is considering whether the right to information can be invoked to find out how much money has been collected in the PM-CARES Fund, from whom and what use it has been put to. Meaning that if you want to give money for “strengthening the fight” against COVID-19 without asking questions later about what became of that money, then your entire donation is deductible from your income without any limit and will be exempt from taxation. However, if you spend money actually fighting the disease itself, then only Rs 50,000 of your medical expenses will be deductible and the rest of your expenditure will be subject to levy of the Aatmanirbharta Tax.
The 12% IGST being charged on oxygen concentrators received as a gift from abroad and imported for personal use has already been struck down by the Delhi high court recently in Gurcharan Singh vs Ministry of Finance as being “manifestly arbitrary, unreasonable and unfair”. This indirect tax version of the Aatmanirbharta Tax just seems to have been designed to add insult to injury at a time when people were having to resort to desperate measures to procure oxygen supply for loved ones suffering from COVID-19. The court in its judgement observed that “the State should relent, or at least lessen the burden of exactions which take the form of taxes, duties, rates and cess, in the very least, in times of war, famine, floods, epidemics and pandemics since such an approach allows a person to live a life of dignity which is, a facet of Article 21 of the Constitution.”
All of this makes one wonder what the prime minister was referring to when, in June 2020, he said “aapda ko afsar mein badalna hai (we have to turn disaster into an opportunity)”. We may just have misunderstood the statement at that time. The aapda was ours, the afsar was that of the Government of India.
Nizam Pasha is a Delhi-based lawyer. He can be found on Twitter @MNizamPasha. The views as well as the pain expressed in this article are personal.