Gratuity And Leave Salary

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MAHESH (Querist)
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20 September 2007 Whether Gratuity and Leave Salary becoming due on the death of an employee is taxable in the hands of nominee? Please explain with reasons.

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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20 September 2007 Hello Mr Mahesh,
Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax(Circular No. 573 dated 21.8.90).

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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20 September 2007 As per Section 10(10AA) of the Income tax Act,1956 : "Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable"

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MAHESH

MAHESH (Querist)
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20 September 2007 Sec 10(10AA) does not expressly exempt leave salary received by the nominee/legal heir.Board Circular exempts it vide circular no.35/1/65-IT(B) dt.5/11/65. On what basis such exemption is allowed by Board?
Gratuity received by legal heir/nominee is exempt as per Board's Circular? On what basis such exemption is allowed by Board?

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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21 September 2007 Dear Mr Mahesh,
You are asking abt the basis of board.
Yeah its a good question, board can't amend the act itself...good

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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21 September 2007 I will go through the rule or power if any, then only I can answer the query.
Thanks

Mallidi Ramabrahmananda Reddy

Mallidi Ramabrahmananda Reddy (Expert)
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21 September 2007 Your question is whether it is taxable in the hands of the nominee. Is it income of the nominee?. First let us decide whether it is in the nature of income in the hands of nominee. If it is not income in the hands of nominee he is not liable to pay tax.