Financial assistance
C. P. CHUGH
(Querist) 12 April 2012
This query is : Resolved
Haryana Government Service Rules earlier provided for employment of next eligible in case of death of an existing employee. However the practive of providing alternate employment has been dispensed with and a monetary help in the shape of financial assistance is provided to the spouse of such deceased employee which is equal to his/her last salary drawn and it continues till such deceased employee (if alive) would have reached the age of retirement. There-after the spouse gets normal pension/family pension as the case may be.
My querry is whether such assistance is "Profit in liew of Salary" or is taxable under the head "salaries" or is taxable under the head "income from other sources"
Xperts pls share their views.
adv. rajeev ( rajoo )
(Expert) 12 April 2012
In my opinion it is income from other source, because wife has no income except this, she is not an employee of the paying co., so it is income from other source.
Raj Kumar Makkad
(Expert) 12 April 2012
This assistance is definitely an income from other sources for the beneficiary and is accordingly taxable.
If widow is not capable to get the aforesaid assistance, the same is available to other eligible family member/members.
Deepak Nair
(Expert) 12 April 2012
Yes. This will fall under income from other sources and is taxable.
C. P. CHUGH
(Querist) 12 April 2012
Dear All,
How and Why this is not "Profit in lieu of Salaries" u/s 17 of the Income-tax Act
and chargeable to tax under the Head "Income from Salaries"
Pls Share.
venkatesh Rao
(Expert) 13 April 2012
It is a gratuitous amount paid without extracting work. By whatever name you call, it is akin to family pension if we analyse the theme behind granting it, and thus it is under the head income from salary/pension.
C. P. CHUGH
(Querist) 13 April 2012
Well quite confusing and not so satisfactory explanation. What i was expected a reply in simple terms such as "in the absence of employee-employer relation the financial assistance to the spouse of ex-employee could not fall within the preview of "Income from Salaries" and rightly terms as "Incme from employement" in DTC. Since it is not income from salaries, and there being no contractual agreement to carry on any work the payment would definitely fall within the scope of "Income from Other Sources" and shall be taxable as such.
prabhakar singh
(Expert) 13 April 2012
Agree with Mr.C.P.CHUGH last explanation.It is a payment ex gratia ,with out work hence taxable not as salary but as income from other sources.
Vineet
(Expert) 18 April 2012
Chugh Sahib...you knew the answer. Then was it a quiz??
Anirudh
(Expert) 18 April 2012
Dear Mr. Chugh,
The amount is nothing but Pension (Family Pension). It will not be "Income from other sources".
This is for the following reason:
1. During the period when the spouse is being granted the last pay drawn, no separate family pension is being granted, to which the surviving spouse is otherwise eligible. Therefore, whatever may be the name assigned to such payment, it is nothing but family pension.
2. Even in the case of Central Govt. such scheme is in vogue. In case of death of an employee while in service, the spouse gets enhanced family pension for 7 years or up to a prescribed age limit of the deceased employee whichever is less. Thereafter family pension at normal rate will be paid.
The scheme prevalent in Haryana is nothing but such enhanced family pension during certain period (i.e. upto the date of normal superannuation of the deceased employee).
Therefore, it cannot be said that it is income from other source.
In any case, I am not able to appreciate why this question arises. Is it only to know the correct head under which the said income needs to be classified, or any other purpose?
C. P. CHUGH
(Querist) 18 April 2012
Hi Anirudh,
Yes the querry was only to ascertain the correct head of income under which it is taxable. So far as the taxability of income is concerned, it was never doubted. However the actual question was' if it is taxabale under the Head " Income from Salaries" provisions of chapter XVII with respect to deduction of tax at source were applicable, otherwise it escapes the withholding tax net. Such spouses, normally widows, are mostly illetrate and in case the receipt in their hands goes without with-holding tax, they are very unlikely to discharge their liability and file return. It could be a lacune in the law so far, i have understood it in this prespective. Vineet ji, know you must be satisfied that it was not a quiz, but an actual problem on which Xperts views were solicited. In view of details provided above, Xperts may revisit their views.
Thanks to all
M/s. Y-not legal services
(Expert) 12 April 2012
