GOVERNMENT OF INDIA
New Delhi, dated 13.10.2010.
The General Managers (Personnel)
Subject : Payment of Ex-Gratia lumpsum compensation to the families of Railway employees who die in harness in performance of bona fide official duties – Taxability reg
Ref: Board’s letter No.E(W) 2008/CP-1/7 dated 30.08.2008.
A clarification has been sought whether lumpsum payment made on account of ex-gratia compensation to widow/legal heir of Railway employees who dies in harness in performance of bona fide official duties is taxable or not. The matter has been examined in consultation with Finance Directorate and it is advised that all matters regarding recovery of Income Tax are governed by the provisions of Income Tax Act, 1961 and various instructions issued by Ministry of Finance.
2. Accordingly, in this regard, a copy of circular No.573 dated 21.08.1990 issued by Ministry of Finance (Central Board of Direct Taxes) is enclosed for information. The relevant extract of the circular reads as under:-
“ Taxability of lump-sum payment made gratuitously or by way of compensation or otherwise to widow/other legal heir of an employee – regarding:
Clarification have been sought from the Central Board of Direct Taxes whether a lump-sum payment made gratuitously or by way of compensation or otherwise to the widow or other legal heir of an employee who dies while still in active service, is taxable as income under the Income-Tax Act, 1961.
2. This issue has been examined by the Board and it is clarified that any such lump-sum payment will not be taxable as income under the aforesaid Act.”
3. Please acknowledge receipt.
If an govt employee expires/dies during serve in Haryaa, The haryaa govt. provides to his family the last pay drawn only (exclduing all allowances) as compasssionate financial assistance in the shape of ex-gratia on monthly basis . No other benefit i.e service to the legal heir or any other ex-gratia except monthly ex-gratia till the date when the deceased employee retire ie upto 58 years, Kindly let me know whether this monthly ex-gratia is ta xable or not. Such type of entire family in haryana is seeking clarification. But no response is received till date.Pl, clarify thanks.