INCOME TAX ON EX GRATIA AMOUNT

Some comrades have forwarded to me a newspaper report stating that Kerala High Court ordered that income tax cannot be levied on ex gratia amount paid to VRS optees. From the news item (in Hindi), I could understand that it was a judgement delivered by Justice K S Radhakrishnan and Justice K T Sankaran of Kerala High court in a case between SBI and Income tax department.

With that clue, I traced the Kerala High court judgement and found that it is an old case. The said judgement was delivered on 8-12-2005, 14 years ago.

I know nothing of Income tax rules and cannot offer any comment on it. From the last two paragraphs of the judgement (The full judgement is attached hereunder) I understand that VRS people are entitled to get Income tax relief under section 89(1) of Income Tax Act in addition to the reliefs under Section 10(10C) (viii).

Those who are interested in the matter may please study the judgement and use it, if beneficial…. P S Ramankutty

The judgement: vrs-it-sbi-case.htm