Such payments include compensation due or Ex-gratia payment made voluntarily by an employer is not taxable as ‘profits in lieu of salary _____ 24 December 2015 Background Section 17(3) of the Income-tax Act, 1961 (the Act) brings certain payments such as profits in lieu of salary within the ambit of ‘income from salaries’. disburse the Bonus/Ex-gratia to their employees for each financial year (commencing from the financial year 1996-97) with the provision of the Act till the provision of the Payment of Bonus Act remain unammended, without making specific reference to the Government." Ex-gratia is usually paid to employees who are not covered by the bonus. 4. The minimum bonus rate is 8.33%, and the maximum goes up to 20%. Employers give ex-gratia payments as an act of compassion or kindness while they pay bonuses according to the performance and productivity of employees. Salary and Wages in India: A complete guide to provision for VDA and minimum wage, legalities of ex-gratia payments, probationer's entitlement to minimum wages, LTA, medical bonus… Search AccountingWEB. This claim, it appears to us, has been rightly allowed by the Tribunal and thus calls for no interference. A bonus is a statutory expense, whereas, in ex gratia, there is no liability to pay. bonus/incentive; arrears of salary or any other arrears paid to an employee; employee`s share option scheme (if employee opts for MTD deduction) tax borne by employer; gratuity; compensation for loss of employment; ex-gratia; director`s fee (not paid monthly) commissions; allowances (variable amount either paid every month or not ) The maximum bonus is 20% per annum. Examples. Your bonus is a reflection of our appreciation for your efforts and 10,000 is also called Ex-gratia. Ex Gratia Payment vs. Therefore, the normal procedure where a lump sum is to be paid to an employee on Ex gratia (/ ˌ ɛ k s ˈ ɡ r eɪ ʃ (i) ə /; also spelled ex-gratia) is Latin for "by favour", and is most often used in a legal context. Latest Any Answers . Also if employer pay an amount in lieu of bonus to employees with a salary of above Rs. (4) Ex gratia bonus should be paid to the members of the claimant Union on the same basis on which ex gratia bonus is paid to other employees of given with effect from 1-1-1975. Advertisement. Didn't find your answer? Bonus. I … Ex gratia bonus to long standing employee retiring . 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. The benefit will also not be admissible to those who are entitled to ad-hoc bonus sanctioned by the State Government and those who are employed/ re-employed under any Public Undertakings/Statutory Bodies under the Government and are in receipt of bonus or ex-gratia payment in lieu thereof during the current financial year. 6. When something has been done ex gratia, it has been done voluntarily, out of kind or grace.In law, an ex gratia payment is a payment made without the giver recognising any liability or legal obligation.. If employer pay over and above 20%, it is called Ex-gratia. Ex-gratia payments are an exception to that rule and fall under a tax exemption from s.403 Income Tax (Earnings and Pensions) Act 2003 for any amounts under £30,000.00. No such limits in ex gratia as it is lumpsum payment. Ex gratia bonus to long standing employee retiring. In nut shell, Bonus is statutory and Ex-gratia is optional. Sample Merit and Bonus Adjustment Letters [EXAMPLE 3] Dear {{ employee_first_name }}, Please note the addition of “Bonus” to your paycheck for this week. Search AccountingWEB . 5. Differences between ex-gratia payments and bonus. IHT additonal allowance increase amounts per year. It has been a long time coming, and it has taken a lot of hard work to accomplish our goals but we have done it! The amount the employee decides to pay in an ex-gratia varies, while bonuses range from 8% to a maximum of 20% according to the employee bonus act.