From time to time, the Hon'ble Supreme Court of India, and various High Courts have delivered judgments that if a Govt. department or Public Sector Unit fails to timely disburse Salary, Allowances, Gratuity, General Provident Fund, or Pension to its existing or former employees without any fault of the later, it is liable to pay due interest on delayed payment.
Please inform, whether any income tax relief is available to an employee or pensioner getting such relief (penalty interest).
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Income tax relief on penalty interest
Replies (3)
No. Its taxable income, assessed in the year of receipt.
I have received following response from a CA over email. I invite all to share their views on it.
Even if somebody is lucky enough to get such additional payments from his employer in the form of interest on delayed payment or penalty, the same would not be exempted from tax.
However, such additional income received by the employee would be included under the head "Income from Other Sources" rather than " Salaries".
Agreed. Taxable under head Income from Other Sources.
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