Due to dwindling income, we could not pay exgratia ( as all employees draw salary above Rs.21000 threshold) during 24-25. We had provided liability only for official Cadre but not unionized staffs. This August 26, would like to pay exgratia to all. If we pick up liability provision towards exgratia payable to unionized staffs in July, whether any tax leverage or loss of tax break will be there. Please suggest the best course of action. Regards,
Under Section 43B of the Income Tax Act, ex-gratia is deductible only on a payment basis. If paid in August 2026, the tax deduction will be available for FY 2026-27. There is no tax "leverage" for the previous year (2024-25) if the payment deadline has passed, but the benefit is preserved for the year of payment.
Naveen Fintech Pvt Ltd
Kolkata
CA Inter
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