Will such amount be taxable in my hands It's hard to think of a more relevant example. Any tax free lump sum payments you receive are then taken from this benefit. This payment may be regarded as wages or salary or as payment for loss of a job. 200/115/90-ITA-I, dated 21-08-1990 provided that a lump sum ex gratia payment made, to the widow or other legal heirs of an employee, who dies while still in active service, will not be taxable as income under the Income-tax Act, 1961. You don't need a pre-existing scheme. 776, dated 8-6-1999. The tax-free amount is not part of the employee's ETP. Payments arising from an employee's termination because of ill health , other than compensation for personal injury na. Ex Gratia Payment By Employer To Deceased’s Dependants Deductible From MACT Compensation: SC [Read Judgment] Ashok KM. Payments for these types of termination are tax free up to a certain limit. An advance or loan. The Inland Revenue has confirmed, in a Statement of Practice published on 31st October, 1991, its views that an "arrangement" by an employer to make ex gratia payments to an employee on his retirement (or death) constitutes a "retirement benefits scheme". A guide to the Income Tax ... payment on non-accidental death . Payment in lieu of notice. My husband died in September 2012 while he was a director in a reputed company. Ex gratia payment received by a person or his heir from the Central Government/State Government/Local Authority/Public Sector Undertaking, consequent upon injury to the person/death of a family member, while on duty, is not liable to tax - Circular : No. 25 Sep 2016 3:33 PM GMT. Circular No. Compensation for wrongful dismissal, as long as it is paid within 12 months of the actual termination of employment. Payments for loss of future super payments na. Employee share scheme payments. 573, F.No. The company gave me certain amount as ex-gratia compensation. Therefore, the normal procedure where a lump sum is to be paid to an employee on You don't need documents. EIM15310 discusses the taxation of an ex gratia payment. It says: "an employer-financed retirement benefits scheme is created by the payment." So if the payment is ex gratia to the legal heirs, certainly it was not an amount due to the deceased. if any of the ETP is tax-free An ETP has a tax-free component – if part of the payment is for invalidity or work done before 1 July 1983, you don't withhold tax from this component. If your contract provides for payment in lieu of notice, the payment is treated as pay and exemptions do not apply. Share This - x. HMRC's view is clear - if there was a payment… lump sum termination payments, including so-called “ex gratia ” or gratuity payments made to an employee in consequence of an “agreed resignation” or “mutually agreed termination”, are subject to income tax. 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