Many a times there is situation where employee die at work place due to safety or concerns failure of machinery or any other reason and his/ her family member gets a compensatory/ gratuitous payment from the company.
Similarly, in the current situation where everything is not safe out there and most of the people are working from home. However there are situations where people need to go out and work and that can lead to them being infected and in some cases die because of same.
In above cases there are chances of companies making a compensatory/ gratuitous payment to the family members of the employee if the employee was on duty or was employed at the time of his death.
In such scenario what will be the taxability of such receipt in the hands of recipient as it is not insurance receipt which shall be exempt in the hands of Family.
In relation to above CBDT has issued a circular 573 in 1990 dealing with the above scenario where it has been clearly mentioned that “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 will not be taxable as income.” Though the circular was issued in 1990 same shall be applicable in current scenario.
Thus, it is important to note that if a person receives monthly maintenance amount from the employer or company same could be held as taxable.
Circular for taxability of gratuitous payment
To download the circular CLICK HERE.
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