My husband died in September 2012 while he was a director in a reputed company. Employee share scheme payments. It says: "an employer-financed retirement benefits scheme is created by the payment." 25 Sep 2016 3:33 PM GMT. Any tax free lump sum payments you receive are then taken from this benefit. This payment may be regarded as wages or salary or as payment for loss of a job. Payments for loss of future super payments na. If your contract provides for payment in lieu of notice, the payment is treated as pay and exemptions do not apply. Circular No. Share This - x. Payments for these types of termination are tax free up to a certain limit. lump sum termination payments, including so-called “ex gratia ” or gratuity payments made to an employee in consequence of an “agreed resignation” or “mutually agreed termination”, are subject to income tax. EIM15310 discusses the taxation of an ex gratia payment. 200/115/90-ITA-I, dated 21-08-1990 provided that a lump sum ex gratia payment made, to the widow or other legal heirs of an employee, who dies while still in active service, will not be taxable as income under the Income-tax Act, 1961. The company gave me certain amount as ex-gratia compensation. 573, F.No. The tax-free amount is not part of the employee's ETP. if any of the ETP is tax-free An ETP has a tax-free component – if part of the payment is for invalidity or work done before 1 July 1983, you don't withhold tax from this component. The Inland Revenue has confirmed, in a Statement of Practice published on 31st October, 1991, its views that an "arrangement" by an employer to make ex gratia payments to an employee on his retirement (or death) constitutes a "retirement benefits scheme". It's hard to think of a more relevant example. So if the payment is ex gratia to the legal heirs, certainly it was not an amount due to the deceased. HMRC's view is clear - if there was a payment… An advance or loan. You don't need a pre-existing scheme. You don't need documents. 776, dated 8-6-1999. Ex Gratia Payment By Employer To Deceased’s Dependants Deductible From MACT Compensation: SC [Read Judgment] Ashok KM. Payment in lieu of notice. Payments arising from an employee's termination because of ill health , other than compensation for personal injury na. Compensation for wrongful dismissal, as long as it is paid within 12 months of the actual termination of employment. 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