So if the payment is ex gratia to the legal heirs, certainly it was not an amount due to the deceased. 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. 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. Any tax free lump sum payments you receive are then taken from this benefit. You don't need documents. Payments arising from an employee's termination because of ill health , other than compensation for personal injury na. The company gave me certain amount as ex-gratia compensation. 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. Will such amount be taxable in my hands Share This - x. EIM15310 discusses the taxation of an ex gratia payment. An advance or loan. A guide to the Income Tax ... payment on non-accidental death . 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". The tax-free amount is not part of the employee's ETP. Ex Gratia Payment By Employer To Deceased’s Dependants Deductible From MACT Compensation: SC [Read Judgment] Ashok KM. 776, dated 8-6-1999. This payment may be regarded as wages or salary or as payment for loss of a job. My husband died in September 2012 while he was a director in a reputed company. You don't need a pre-existing scheme. If your contract provides for payment in lieu of notice, the payment is treated as pay and exemptions do not apply. It's hard to think of a more relevant example. Payments for loss of future super payments na. Circular No. 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. Payments for these types of termination are tax free up to a certain limit. Employee share scheme payments. 25 Sep 2016 3:33 PM GMT. Payment in lieu of notice. Therefore, the normal procedure where a lump sum is to be paid to an employee on It says: "an employer-financed retirement benefits scheme is created by the payment." 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