taxability on ex-gratia

[Kalyanasundaram Subramaniam]

Yesterday I had sent the following email to my bank. 

HRM Department

Indian Bank

Chennai

 

Dear sirs

 

I am a retired bank pensioner. My SR Number is 7321.

 

I understand that as per recommendations of Indian Banks Association, Indian Bank will be disbursing ex-gratia to all the pensioners in addition to regular pension.

 

The said ex-gratia is exempted from the Income Tax.

 

The Gujarat High Court in the case of Anubhai R Naik held that a voluntary payment made by the employer without there being an obligation on the part of the employer to pay any further amount would not amount to compensation in terms of Section 17(3) of Income Tax Act. As the ex-gratia that is going to be paid is not in lieu of salary within the ambit of income from salary, it is not taxable.

 

The proposed ex-gratia payment is similar to payments to retirees out of the Staff Welfare Fund.

 

Hence I request you to arrange to credit the proposed ex-gratia separately and not to club it with the regular monthly pension payment.

 

This will help me and also many pensioners in filing Income tax returns without cumbersome working and explanation.

 

It will be of great help, if you could kindly acknowledge receipt of this communication.

 

Thanks/Regards.

 

S Kalyanasundaram

9003179157

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[JSOMA SHEKARA]

Most of the pre 2002 pensioners drawing pension upto 45000 will not come under tax net, unless they may be having income other than pension. Only 5-10% pensioners have tax problems as they may be having extra taxable  income in addition to the pension,

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[Sadhan Bhattacharyya]

Thank you for the information about ex-gratia payment. I didn't know about the taxability of this type of payment. Hope the bank will take care of it. All the pensioners will be benefitted. 

Though as per my understanding the whole pension income itself should be out of the preview of any type of taxation, since we have earned it after paying taxes through our life time of work and paying  all types of taxes. The government instead of providing any benefit, are collecting taxes even on the medical insurance. This is totally absurd. I wonder why no one is moving the court or the legislature why such taxes are imposed. 

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[P. S. SATYANARAYANA]

The question here is whether it is taxable or not.  How many pensioners are affected is a different matter.

Virus-free.www.avg.com

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[Sridhar Mandyam]

In our case it is taxable.

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[Kalyanasundaram Subramaniam]

CBI circular says it is taxable. circular attached. 

[JSOMA SHEKARA]

Central Bank of India has clarified that Ex gratia payable to regular pensioners are taxable but ex gratia payable to family pensioners are not taxable.

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[ramasami mohankumar]

What an anomaly?

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[kandala ashok]

That is their zHR or legal cell's opinion and subject to further debate. It may have to highest level .

On Fri, 29 Mar, 2024, 10:21 am JSOMA SHEKARA, <jsomase...@gmail.com> wrote:

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[Srinivasan Badri]

It is  taxable  as per cA firm view. If any clarification is required,  we can directly refer  to income tax Commissioner .or the higher board.  Our retirees can meet  them  with a representation.  The banks are obliged to add  exgratia  as taxable income only. 

No point in arguing inthis forum 

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[Sridhar Mandyam]

If one is very sure that ex gratia is not taxable, they can file the return and claim refund. Banks say it is taxable income. 

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[Kalyanasundaram Subramaniam]

I have sent the following reminder.

I regret to note that there is no response for my mail even after 20 days. 

In the meanwhile, pension for March has been credited which is inclusive of ex-gratia. 

I do not understand what can be the difficulty for the bank to make a separate credit for ex-gratia, which can be useful for thousands of pensioners like me. 

Bank may or may not provide this relief. It will be between the assessee and the tax department. A separate credit for ex-gratia will only be an enabling provision for us to claim exemption. 

I hope to get your response soon. 

In the meanwhile, let me provide the following materials which will enlighten that ex gratia can be tax-free. 

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

Extract: 

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://assets.kpmg.com/content/dam/kpmg/pdf/2016/02/KPMG-Flash-News-Arunbhai-R-Naik-1.pdf

Extract: 

The Gujarat High Court in the case of Arun Bai R Naik (the taxpayer) held that a voluntary payment made by the employer without there being an obligation on the part of the employer to pay any further amount would not amount to compensation in terms of section 17(3) of the Act

Thanks/Regards.

S Kalyanasundaram 

[Ramakrishnan S]

Iob today credited exgratia, but less 100% da neu. Anyway good. 

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[JSOMA SHEKARA]

If IBA through a letter had advised all Banks to pay a fixed sum every month  till further notice to all pensioners that is Ex gratia.  Here there is no legal commitment and  is voluntary. There can be no conditions for voluntary payment.

What IBA and UFBU agreed is just an interim relief payment in the  garb of EX gratia,

IBA and UFBU have signed MOU and final agreement on 8th March 2024 wherein the IBA has committed that this monthly payment will be made till 31.10 27/ The moment you sign agreement it loses characteristics of voluntary payment. But IBA is afraid pensioners may claim this as interim relief in lieu of  pension  revision. So they call it Ex gratia. If this is really ex gratia why clubbing this with regular pension. In Passbook it is mentioned as Regular Pension. There are contradictions. However only few pre 2002 pensioners have the tax problem and Unions may not take up this issue and other pensioners are not bothered as long as additional amount is credited in whatever form.

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[pradip kumar Roy]

I think that the existing ex-Gratia payment is on account of Pension updation and when pension is taxable this amount will also taxable. 

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[Kalyanasundaram Subramaniam]

Please remember that the court has not recognised the MOU signed on pension wherein our pension should be on the lines of RBI pension. They are simply parleys, no bindng agreement.  If the MOU is going to be binding, I welcome it. Let there be pension as in RBI. 

When I ask the master "bhavathi bikshaan thegi" and he gives some eight anaa coin, there is no agreement here. 

Why banks must decide whether this is taxable or not?  Let it be decided by the Income Tax department. If the bank shows ex-gratia separately, the bank is not going to loose anything. It may help us to make a suitable claim, when we file IT return. 

Regards.

S Kalyanasundaram 

[kushal mukhoti]

In 2018 when we received arrears of the difference between 1616 and 1684 points merger, the same question arose about the taxability of the interest earned thereon. Most of us opined that the interest earned is taxable. But Mr. C. N. Prasad argued that the interest should be viewed as a penalty and hence not taxable. He also uploaded his form 26AS on this platform to substantiate his claim that SBI has shown the interest portion separately in a non-taxable section. I don't know how he treated the matter in his IT return for that year. But I had shown the interest portion under the 'Income from other sources'. 

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[Rameshbapu P]

Sir,

In my opinion, Ex-Gratia is not Pension. If Pension updation is revised and Pension is increased, we can pay Tax. So Ex-Gratia is not taxable. I think so. Am I correct Sir ? It should not be clubbed with Pension.

With regards

P RAMESHBAPU 

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[Gajanan Chaudhari]

Sir, is there any news for revision of ex gratia for April 2024 onwards?

[MOHAN P]

Mr Gajanan Chaudhari,

In the settlement dated 8th March '24, it is only mentioned as follows:

"The next review of the ex-gratia amount shall be undertaken in April 2024 and thereafter shall be subject to review annually and as mutually agreed between the IBA and the Unions/Associations."

No date has been fixed yet, by IBA to discuss/review the above issue with unions and more over,any  substantial increase in current Ex -gratia too, cannot be anticipated.

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[Sridhar Mandyam]

I think the word ex gratia refers to payment made in kind when a person suffers due to ill health, accident or due to death of an earning member of family. Such amounts are exempted from tax. In our case IBA has just called it as ex gratia but it does not fit into the definition of ex gratia. It is just another addition to pension.

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[JSOMA SHEKARA]

I think this review is not for enhancing the ex gratia amount. In MOU it is stated that EX gratia will be paid based on pension as  existed on 31.10.22 and this will be reviewed every year. This is valid  from 01.11.22 to 31.03.24. There is no provision for automatic revision of Ex gratia taking into consideration any increase in DA after. 01.11.22. Every year IBA and UFBU shall meet and sign minutes for the same.

Only possibility is from 01.01.24 Ex gratia will be paid based on March 24 Pension which will take care of 100% DA demand as well as  increase in DA.

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[krishna mohan nidumolu]

Nothing left for discussion. It is already settled matter. Taxable. All Bank Managements are treating it like that. No discretion left for us. 

Regards. 

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[K Balasubramanian]

We can take this way for clarity .any payment given under section 10 is exempted from tax .for vrs 2001 exgratia upto 5 lakhs is tax exempted under section 10.the balance amt was taxable and we paid IT on that. 

The present exgratia payment is silent on sec tion 10 aspect .hence it is definitely taxable in the hands of the pensioner .

More clarification regarding the applicability of section 10 for this exgratia payment only IBA  MOF can decide .

With regards

K balasubramanian  VRS 2001

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