As per standard definition An Ex-gratia payment is made to an individual by an organization, government, or insurer for damages or claims, but it does not require the admittance of liability by the party making the payment. An Ex-gratia payment is a gesture of goodwill.
Any sort of additional compensation or severance pay for an employee from employer or for anyone it to matter is considered as Profits in lieu of salary’ under Section 17(3) of Income Tax Act. hence is taxable.
however there is an exemption for this, only in certain condition that is if compensation is received under Voluntary Retirement Scheme (VRS) framed in accordance with prescribed guidelines under the section 10(10C) grants exemption to that person if and only if The exemption is capped at Rs 5 lakh and is available to employees of an authority established under the Central or State Act.