Death claim

Gratuitous payments to widow/legal heirs of employee - 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, is not taxable as income under the Income-tax Act, 1961—Circular : No. 573, dated 21-8-1990.

But this does not apply to Gratuity received on death. Gratuity will be exempt based on the conditions mentioned u/s 10(10).