TDS on compensation paid to emloyee's family...?

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Querist : Anonymous

Querist : Anonymous (Querist)

07 December 2010 In a running factory, a worker died and compensation was demanded by the workers family in court case. And settlement has been done by giving Rs. 10 lakh. Whether TDS provisions are attracted on it? If yes in which section?

Rajesh Kumar

Rajesh Kumar (Expert)
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07 December 2010 No.
It is not an income of the family, but merely a payment to compensate the losses suffered by them. No TDS is applicable.

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Querist : Anonymous

Querist : Anonymous (Querist)

07 December 2010 Can you suuggest me any case study as there is chances of manipulation and whether that is taxable for employees family or not.....?

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Rajesh Kumar

Rajesh Kumar (Expert)
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07 December 2010 Yes. For TDS provision to be applicable, the payment amount must fall under some specific heading. There is no heading under which this payment falls.
Further, TDS for compensation under Section 194LA refers to compensation inconsideration of acquisition of immovable property only.
Further, the payment will not fall under the head salary.
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Different people may have different views on the same issue. Merely because some person is sure, can never mean he is correct.

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CA.ViVeK M ACA

CA.ViVeK M ACA (Expert)
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07 December 2010 Compensation paid to the workers family on account of death of employee is in the nature of capital transactions. No TDS shall be applicable in this case

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Querist : Anonymous

Querist : Anonymous (Querist)

07 December 2010 Will you please provide me the definition of capital transaction...?