25 Sep 2016 3:33 PM GMT. Share This - x. 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. If your contract provides for payment in lieu of notice, the payment is treated as pay and exemptions do not apply. HMRC's view is clear - if there was a payment… 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. The tax-free amount is not part of the employee's ETP. A guide to the Income Tax ... payment on non-accidental death . EIM15310 discusses the taxation of an ex gratia payment. This payment may be regarded as wages or salary or as payment for loss of a job. The company gave me certain amount as ex-gratia compensation. Compensation for wrongful dismissal, as long as it is paid within 12 months of the actual termination of employment. 776, dated 8-6-1999. 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. Employee share scheme payments. You don't need a pre-existing scheme. Therefore, the normal procedure where a lump sum is to be paid to an employee on Any tax free lump sum payments you receive are then taken from this benefit. Payments arising from an employee's termination because of ill health , other than compensation for personal injury na. Circular No. Payments for loss of future super payments na. 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. It's hard to think of a more relevant example. It says: "an employer-financed retirement benefits scheme is created by the payment." An advance or loan. So if the payment is ex gratia to the legal heirs, certainly it was not an amount due to the deceased. 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". Payments for these types of termination are tax free up to a certain limit. My husband died in September 2012 while he was a director in a reputed company. 573, F.No. Payment in lieu of notice. Ex Gratia Payment By Employer To Deceased’s Dependants Deductible From MACT Compensation: SC [Read Judgment] Ashok KM. You don't need documents. Will such amount be taxable in my hands 'S hard to think of a more relevant example on non-accidental death arising from an employee 's ETP,. 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