Ex Gratia Payment
25.02.2025
Ex Gratia Payment
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For Prelims: About Ex Gratia Payment |
Why in the news? The Ministry of Railways handed over wads of cash in bundles of notes of Rs 100 and 50 after announcing that it would provide Rs 10 lakh ex-gratia to the kin of the 18 deceased in the stampede at the New Delhi Railway Station recently.
About Ex Gratia Payment:
- It is a type of payment made by an organization, government, etc., to an individual for damages or claims without recognizing any legal obligation.
- “Ex gratia” means “by favor” or “by virtue of grace” in Latin.
- Thus, an ex gratia payment is a voluntary payment that is not a part of an organization’s legal liability.
- Ex gratia payments are not common since companies or other organizations are usually only willing to cover the payments under legal enforcement.
- However, some organizations use ex gratia payments to express their goodwill to maintain good long-term relationships with the payment receivers.
- For example, a company experienced a bad year and decided to lay off a large number of employees.
- In addition to compensating the employees according to legal terms, the company may also pay extra amounts to show its benevolence.
- It can help the company to lower the negative effect of the job cuts on its public image.
- Ex gratia payments are not taxable in India unless they are made in lieu of salary or wages.
Source: Indian Express
Consider the following statements regarding Ex Gratia Payment:
1. It is a voluntary payment that is not a part of an organization’s legal liability.
2. Organizations use ex gratia payments to express their goodwill to maintain good long-term relationships with the payment receivers.
3.Ex gratia payments are taxable in India.
How many of the above statements are correct?
A.Only one
B.Only two
C.All three
D.None
Answer A