Is compensation paid by employer taxable? The devil is in the detail

In the absence of any regulation, a demand can be raised even in case of accidents or partial disability

Jitendra Solanki was paid Rs 32 lakh by his company after he lost an eye on the ship. The money was paid through an insurance company, as Solanki had suffered partial disability and his career in Merchant Navy was virtually over. However, when he bought a house with that money, he received an income-tax (I-T) notice seeking explanation of the source of income. In addition, the tax officer disputed that the compensation would be subject to tax.

Companies have policies for providing compensation to the employees or their legal heirs in case an employee dies or gets injured while in