An employee of a Company has died. Now his wife is eligible for a Compensation under Workmens Compensation Act. Are there any benefits for the Employer and his wife under the Income Tax Act?
An employee of a Company has died. Now his wife is eligible for a Compensation under Workmens Compensation Act. Are there any benefits for the Employer and his wife under the Income Tax Act?
Compensation received by widow will be exempt u/s 56(2) -
in contemplation of death of the payer or donor, as the case may be; or
Further, Employer can claim the amount of compensation as deduction of expense..
Sec 37(1) of the Income Tax Act, 1961
that doesnot say anything about Workmens Compensation Act any where!!. . .
Brother,
All business expenses of revenue nature which r not covered by sec 30 to 36 are allowed under Sec 37(1)..
Brother,
But the amount of Compensation will be taxable in the hands of deceased employee as "Salary"
Compensation received by widow will be exempt u/s 56(2)
And then u say it is taxable. . .U are contradicting ur own statement
Dear
I am sorry for my yesterday's statement, It was INCORRECT...
I said that the sum would be exempt in the hands of widow u/s 56(2) but when i read it carefully the sum is not exempt in the hands of widow rather it is not taxable in her hands, the said compensation is taxable in the hands of deceased employee.
I hope u r getting what i mean...
To clarify further, Sec 56(2) says that sum received in contemplation of death of the "PAYER"
In this case payer is the employer therefor it cannot be said as the sum received on the death of the payer...
Nevertheless the point that Employer will get the deductioni/s 37(1) was rite...
Taxable in the hands of deceased employee as per judjement stated above
I have clarified my doubt on the same. The same is exempt u can also refer to Circular No. 573 dated 28/12/1990
CAclubindia
