K R Ramesh (Service) (201 Points)
24 February 2010Hi
Please let me know the expense treatment in books as well as treatment while computation of Income Tax for a payment/contribution/donation (can call any name) made to the family members of the employee due to death of the employee . The employee was not eligble for gratuity as joined just 2 month back.
Please quote relevant section also.
Many thanks
Regards
Ramesh
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 24 February 2010
I think its taxable in the hands of the legal heir of the employee or the receipent of the income himself.....
Such income is considered as INCOME FROM OTHER SOURCES for tax purposes....
Amir
(Learner)
(4016 Points)
Replied 24 February 2010
Dear K.R. Ramesh,
Death cim Gratity is taxable in the hands of legal heirs as Income under other sources, except as mentioned n Sec 10
But anyother payment will be exempt -
Gratuitous payments to widow/legal heirs of employee - A lump sum payment made gratuitously or by way of compensation or otherwise to the widow or other legal heirs of an employee, who dies while still in active service, is not taxable as income under the Income-tax Act, 1961—Circular : No. 573, dated 21-8-1990.
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. 776, dated 8-6-1999.
K R Ramesh
(Service)
(201 Points)
Replied 24 February 2010
Many thanks for the clarification,
From the company's point of view wil the gratuitious payment made to legal heirs will allowed as business expenditure? Or will it be add back while computing the Tax ?
K R Ramesh
(Service)
(201 Points)
Replied 24 February 2010
Many thanks for the clarification,
From the company's point of view wil the gratuitious payment made to legal heirs will allowed as business expenditure? Or will it be add back while computing the Tax ?
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 24 February 2010
Ofcoarse it will be allowable as business expenditure...
K R Ramesh
(Service)
(201 Points)
Replied 25 February 2010
Hi
I have still doubt on the allowability of this expenditure u/s 37 of the Income Tax Act, 1961 and to prove that such expenditure was done wholly and exclusively for the purpose of business and by which it resuls into enduring benefit to the business of the company.
Had it been a statutory obligation payment in any Act, then yes it could have been considered as business expenditure but this is purely a volutnarily payment in good faith.
The payment would be made irrespective of the tax liability but still the correct treatment should be known.
Please advice
Thanks
Amir
(Learner)
(4016 Points)
Replied 25 February 2010
Dear Ramesh,
The gratituous payment will be allowed as Business expenditure u/s 37...........No matter it was paid under any law or not........
V@$U GUPT@
(CA)
(39 Points)
Replied 24 March 2010
well the gratitious payment made by company voluntarily to employee will be allowed as a business expenditure to company
Mikesh Jain
(CA Final )
(37 Points)
Replied 11 August 2011
please any one tell me about, What is the Taxability on Ex- Gratia Payment recieved at the time of Voluntary Retirement in case of central govt. employee.
venkata narayana reddy m
(ARTICLED STUDENT)
(273 Points)
Replied 15 March 2012
Benefit in lieu of salary payable to an employee opting for voluntary retirement is exempted from being charged to tax to the extent of Rs. 5 lakhs by reason of section 10(10C); even if the payment is stretched over a period of years, the same would not become chargeable to tax in any subsequent assessment year
venkata narayana reddy m
(ARTICLED STUDENT)
(273 Points)
Replied 15 March 2012
Benefit in lieu of salary payable to an employee opting for voluntary retirement is exempted from being charged to tax to the extent of Rs. 5 lakhs by reason of section 10(10C); even if the payment is stretched over a period of years, the same would not become chargeable to tax in any subsequent assessment year
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