34. Taxability of lump sum payment made gratuitously or by way of compensation or otherwise to widow/other legal heirs of an employee

1. Clarifications have been sought from the Central Board of Direct Taxes whether 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 taxable as income under the Income-tax Act, 1961.

2. The issue has been examined by the Board and it is clarified that any such lump sum payment will not be taxable as income under the aforesaid Act.

Circular : No. 573, dated 21-8-1990.

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2 Comments

  1. Yash Lakhani says:

    The amount received as death cum gratuity by legal heirs or widow of the deceased will be tax free or taxable.will Circular No.573-Income Tax dated 21-8-1990 will be applicable in such case where amount is received as gratuity.
    Kindly revert to this.

  2. Sharukh says:

    Whether this circular is still valid? Also if the deceased was working out of India and his family received any compensation from foreign company, then whether it will be taxable or not?

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