tds on compensation

is tds deducted on compensation given to employee in case of death
Replies (2)

TDS has to be deducted only if the employer-employee relationship was existing between the employer and the employee when the income accrued. If income has accrued after the death, it cannot be treated as arising out of employment. 

CBDT, through circular No, 573 dated August 21, 1990, has clarified that 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. 

https://incometaxindia.gov.in/Communications/Circular/910110000000000697.htm

You can also refer to the decision of Mumbai Tribunal in the case of ACIT vs late Shri Anil Bhatia to support the claim that compensation received on death of employee from the employer shall not be taxable.


So there is no question of deducting TDS as the compensation paid is not taxable in itself.

 

thanks

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