Ex Gratia Payment

Ex Gratia Payment Latest 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

• An ex gratia payment 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. 
• The amount of the payment is not limited, but it is generally based on the individual’s or group’s needs and circumstances.

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Ex Gratia Payment FAQs

Q1. What is the maximum ex gratia amount?

Ans. There is no limit on how much an ex gratia payment can be. 

Q2. What is another word for ex gratia payment?

Ans. Ex gratia translates to ‘by favour’ and literally means a voluntary payment or a gift.

Q3. What is gratuity in salary?

Ans. Gratuity is a financial benefit given to an employee as a token of appreciation for their service .

Source: IE