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Taxation on Death of Employee

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N.S.Merchant

Accountant

21 Points Posted on 04 October 2021

Our Pvt. Ltd. Co. issued Non Transferable Redeemable Pref.Shares to employee 15yrs ago. Employee died now, wife is legal heir. Whether Redempn to be paid now be treated as - paid to wife on behalf deceased employee or, shares be transmitted to wife and then redeemed ? If on behalf of deceased, then should LTCG be added to his salary as other income and TDS deducted? If so, then what rate of TDS on this LTCG - 20% or slab rate? If transmitted, then am I right that the LTCG be taxed in wife's hands in her personal return ?

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Quick Summary

This discussion explores the tax implications when an employee who received redeemable preference shares dies. The core question is whether the redemption payment should be treated as income for the deceased employee, with potential Long Term Capital Gains (LTCG) tax and TDS implications, or if the shares should be transferred to the heir or nominee first. The latter scenario suggests LTCG would be taxed in the heir's hands.