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tds on dead employee

Soumyayan (Service) (72 Points)

02 June 2010

Our co. is limited...one of our employee died in 2009-2010...b4 dat we hav deducted 7000 tds from his salary now when we have to calculate his total tax pl advice me what are the benefits on which tax is to be calculated keeping in mind that he is dead.PF...Gratuity...PL encash...& what will we do with the balance amount on which tax is to be paid?

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CA Sandeep Thakur (Managment Trainee) (188 Points)
Replied 02 June 2010

Yes soumayayan there are few benfits provided by IT act for the employee died in the last year.

There are certain provision in the IT act which benefit the deceased employee and their legal heir who are under the obligation to file the return of such deceased

1. The employee in receipt of amount of death from the recognized provident fund is tax free even if the tenure of five years have not expired yet.

2. The employee in receipt of death cum gratuity

Any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services, is exempt from the tax and do not form part of total income of the assesses.

Any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit 188 as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government:

Hence the legal heirs receiving the gratuity from the government is exempt and in such other case the amount is calculated according to the method prescribed

· Avg salary of last ten month X 15 for every completed year of service

· 30

Regards

Sandeep Thakur

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