Income tax on ex-gratia salary compansatation

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Querist : Anonymous

Querist : Anonymous (Querist)

26 March 2012 Hi All,

I have 1 query, My father has been expired & now according to govt rules my mother is getting Ex-Gratia Salary compansatation per month equal to last pay of my father when he expired & that will be continue upto the date my father was expect to retire(2022).

Is this monthy salary compensatation amount is applicable for tax or exempt from tax???

Kindly suggest me on this.

Also suggest me how to fill statement for this..

Thanks a lot.

Querist : Anonymous

Querist : Anonymous (Querist)

27 March 2012 Hi,

Anyone Please answer this.

Thanks.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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31 July 2024 Ex-gratia compensation received by a family member following the death of an employee is treated differently based on the nature of the payment. Here's how it works for tax purposes:

### **Tax Treatment of Ex-Gratia Compensation:**

1. **Nature of Payment:**
- Ex-gratia payments are generally considered as a form of compensation provided by the government or employer to the family of a deceased employee.

2. **Taxability:**
- **Ex-Gratia Compensation:** Under the Income Tax Act, such compensation is typically **exempt from tax** if it is received as a result of the death of an employee. This is considered a compassionate payment and not regular salary income.
- **Section Reference:** The compensation received by the family of a deceased employee, under the rules provided by the government or the employer, is generally exempt under Section 10(10AA) of the Income Tax Act.

### **Filling the Statement in Income Tax Return:**

1. **Exempt Income:**
- In the Income Tax Return, the ex-gratia compensation should be reported as **exempt income**. This means it does not need to be included in the taxable income.

2. **Where to Report:**
- In the Income Tax Return Form (e.g., ITR-1 or ITR-2, depending on the type of income and individual circumstances), you should include this under the section for **exempt income**.
- Typically, there is a specific section for reporting exempt income where you can mention the details of the ex-gratia payment.

3. **Documentation:**
- Keep a copy of the ex-gratia payment certificate or any correspondence from the government or employer detailing the amount and nature of the compensation.
- You may need to provide these documents if asked by the Income Tax Department for verification purposes.

### **Steps to Fill the Return:**

1. **Log in to the Income Tax Portal:**
- Access the income tax e-filing portal and select the relevant ITR form based on your income and filing requirements.

2. **Fill in the Details:**
- Enter all other required details related to your income, deductions, etc.
- Navigate to the section for exempt income and enter the details of the ex-gratia compensation. This ensures it is accounted for correctly but not taxed.

3. **Verify and Submit:**
- Review your filled ITR for accuracy.
- Submit the return and verify it using one of the available methods.

### **Summary:**

- **Ex-Gratia Compensation:** Exempt from income tax.
- **Reporting:** Include in the exempt income section of your Income Tax Return.
- **Documentation:** Maintain all related documents for future reference or verification.

If there are any specific concerns or if the nature of compensation seems complex, consulting with a tax professional or advisor would be prudent to ensure compliance and accuracy in filing.

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