EX-GRATIA PAYMENT

[MOHAN P]

Just for information:

Msg as received from one of officers' Assns.

Dear Members,

'Ex Gratia from 1st Nov.2022 will be disbursed within this month.

We request all the Pensioners to plan/adjust  their Income Tax requirements  accordingly.

Kindly pass on this Information amongst all Pensioners.

Regards

A N Krishna Murthy

President 

CBROA'

BENGALURU

20th March 2024

[Vvns Varaprasadrao]

Whether this amount of exgratia is taxable or not?

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[jaya kumar]

Wii ex gratia attract Incometax?

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[R Balaji]

It will be taxable

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[Kalyanasundaram Subramaniam]

The following is from an article in the Economic Times 

Is ex gratia payment taxable?
Generally, all the payments made by the employer to the employees are subject to taxation in India. These payments come under the employment contract. However, an ex gratia payment is an extra payment made by the employer, and such an amount without any legal obligation is not taxable.

https://economictimes.indiatimes.com/definition/ex-gratia-payment

S Kalyanasundaram

[M A Prasad]

Taxable 

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[Vvns Varaprasadrao]

Since it is not paid in lieu of  pension/wages and is paid on obligation, it is not taxable.

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[CHIRAMEL MATHEW SIMON]

Any payment from employer to employee comes under the head "Salaries", unless it is specifically exempted under the provisions of the Income Act,1961. Thus, I am of the opinion that it is taxable.

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[Sudhakar Nambiar]

DE

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[Sudhakar Nambiar]

Dear Sri Balaji

Some roumer states that ex-gratia is going to be

paid to bank retirees from 1.11.22. If you known

please enlighten me .

[Kalyanasundaram Subramaniam]

Mr Balaji and Mr M A Prasad

Please have a look at https://assets.kpmg.com/content/dam/kpmg/pdf/2016/02/KPMG-Flash-News-Arunbhai-R-Naik-1.pdf

The Gujarat High Court in the case of Arunbhai R Naik (tax payer) held that a voluntary payment made by the employer without there being an obligation on the part of employer to pay any further amount would not amount to compensation in terms of Section 17(3) of the Income Tax Act

S Kalyanasundaram 

[R Balaji]

Noted Sir

Anyway we can get opinion from CA

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[Kalyanasundaram Subramaniam]

Pension is not paid under the head salaries by banks. It is out of pension corpus. 

I believe that the present ex-gratia may be separately paid by banks out of P&L and not out of Pension fund. 

Of course, for the purpose of Income tax, pension is grouped under salary.

All payments to employee/pensioner are not taxable. There are exemptions. For example there are various payments out of staff welfare fund like medical expenses, festival sweets etc. All these are not taxable. In the same way, ex-gratia is not taxable. 

S Kalyanasundaram 

[Ramakrishnan S]

Sir, 

Please correct yourself. The ex-gratia is 100% taxable. 

Ramakrishnan S

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[Govindan Santan]

As ex gratia is  voluntary from the Bank as such it is not taxable. But if on a future date if it is adjusted against pension updation then it will become taxable. Hence position is not clear. 

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[Raj Venkat]

Can this be treated as a honourium or bonus. If it falls in that category can that be taxed? Then the question arises whether this falls into that category without consideration of any honor or a deferred wage.

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[JSOMA SHEKARA]

If it is voluntary it should not have been part of MOU and 9thJoint Note/12th BPS agreement. Voluntary payments by management do not require signature/consent of unions. For ex Ex gratia paid to SVRS retirees. Anyhow on Mar 31st it will be clear whether Ex gratia is taxable or not.

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[Kalyanasundaram Subramaniam]

Mr Ramakrishnan

I have shared enough material to show that the ex-gratia is not taxable. 

You are welcome to share any material to explain why it will be taxable, with relevant cases/tribunal decisions/statutory provisions. 

Thanks

S Kalyanasundaram 

[Govindan Santan]

Ex gratia as it is , not taxable. But if pension updation happens and the ex gratia amount adjusted towards future pension then it will become taxable. So, the position is not clear as of now. 

Govindan 

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[S L GULATI-ADV:-]

Friends,

There have been discussions over the taxability of ex-gratia. Some are opining, it is taxable while others say ex-gratia is not taxable. It is clarified for all that ex-gratia is taxable being the amount being paid in lieu of salary/pension or wages. 

However, Govt. had issued notifications during the year 2020 in finance budget  for exemption from tax on ex-gratia relating to the payments received for expenses for COVID-19.  Information on Notification is appended below for your guidance. 

These Notifications were issued in accordance with the requirements of the Finance Act 2022 relating to the tax exemption of any amount of money received by an Individual as reimbursement of actual expenses for COVID-19 treatment of self/ family members. Also, any sum of money received as ex-gratia from an employer by family members of an individual deceased due to COVID-19 has been exempted from tax with retrospective effect from Financial Year 2019-20, subject to a Rs. 10,00,000/- limit, when the amount is obtained from a source other than the employer. As a result, the CBDT has announced the procedure for seeking tax exemption on reimbursements/ ex-gratia receipts received by individuals/ family members.

Please be guided accordingly and stop further discussion over this minor issue. 

Thanks & regards.
Sincerely yours,

S.L.Gulati
Advocate  (EX-PNB-SVRS-2000)

90348-89525.93062-80765

On Fri, Mar 22, 2024 at 4:37 PM Govindan Santan <govinda...@gmail.com> wrote:

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[Vvns Varaprasadrao]

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[Kalyanasundaram Subramaniam]

Mr JSOMA SHEKARA

Legal definition of ‘voluntary’ can be on the following lines: “acting or done of one's own free will without valuable consideration or legal obligation”

 

While any payment to employees may be with consideration as the employees have to reciprocate as per contract of employment, pensioners do not come under that and hence there is no legal obligation for pensioners. The proposed ex-gratia is not even in the Pension Regulations. We do not know whether it will be paid out of pension fund or out of P&L Account.

 

Unions’ request for consideration of any payment need not be based on any obligation on the part of the management. Unions’ request to the management to consider some payment to pensioners and the willingness to consider the same do not amount to any obligation or legal binding on the management for such a payment.

 

Moreover, MOU does not mean that it is legally enforceable. Yes, once signed, the Bipartite settlement will be legally enforceable.

 

Legal definition of ex-gratia will be on the following lines:

Ex Gratia meaning, in Latin, is “by virtue of grace” or “by favor”. Therefore, an ex gratia payment is voluntary because the paying party doesn't need to compensate the receiver. Ex gratia meaning is a payment made out of virtue to individuals by an organization or government for claims and damages.

 

I hope the above definitions suit the interpretation of income tax provisions so as to exempt the same from the Income tax purview.

 

S Kalyanasundaram