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.