Ex Gratia Payment:
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.
- 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 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.
