Cash equivalent of leave salary payable on the death of a Government servant to his legal heirs-Liability to income-tax-Regarding - Income Tax - 309/1981

Cash equivalent of leave salary payable on the death of a Government servant to his legal heirs-Liability to income-tax-Regarding Circular No. 309 Dated 3/7/1981 To All Commissioners of Income-tax. Sir, Subject: Cash equivalent of leave salary payable on the death of a Government servant to his legal heirs-Liability to income-tax-Regarding. In terms of para. 1(iv) of O.M. No. 16(2)-E.IV(A)/73 dated the 9th January, 1974, issued by the Ministry of Finance, Department of Expenditure, the family of a Government servant, who dies in harness, is entitled to receive the cash equivalent of the leave salary that the deceased Government employee would have got if he had gone on earned leave. The amount is payable on the date immediately following the date of death, subject to a maximum leave salary for 120 days and subject to the reduction envisaged in rule 40(7)(a) of the Central Civil Service (Leave) Rules, 1972. The question whether the amount received by the family in these circumstances is taxable has been considered. 2. The Board have been advised that this receipt in the hands of the family is not in the nature of one from an employer to an employee. The deceased had no right or interest in this receipt. This payment is only by way of financial benefit to the family of the deceased Government servant, which would not have been due or paid had the Government servant been alive. In view thereof the amount will not be liable to income-tax. 3. This may kindly be brought to the notice of all the officers working in your charge. Yours faithfully, (Sd.) V.B. Srinivasan, Secretary, Central Board of Direct Taxes.