Income Tax on Exgratia Payment, Income Tax

[M C Rawat]

We are an Industry Association registered under M P Societies Registration Act and Recognised by the Income Tax Deptt as a Charitable Institution.. We are having five employees only, who are mostly retired reemployed persons.

They are paid salaries which are too low and are outside taxable limits. However, each year on the eve of Deepawali these employees are paid two months salary as exgratia..

We would like to know whether this payment is to be treated as salary income and taxable in the hand of the employees?

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

Yes, this is taxable in the hands of the employees.