22 September 2011
Sub: Coverage of Gratuity Trust recognized by CIT under Provisions of the Income Tax Act, 1961
1) Pursuant to the Provisions of Section 3(A) of The Payment of Gratuity Act, 1972 every factory is covered under the said Act.
2) Further, Section 4(5) of the said Act gives a right to an employee to receive better terms of Gratuity.
3) Company A is having its own Gratuity Trust which is recognized by the Commissioner of Income Tax (CIT). The relevant Clauses of the said Trust Deed offer better terms of Gratuity than the statutory payment required to be made under the Payment of Gratuity Act.
4) Further Section 10 (10) of the Income Tax Act, 1961 is referred for calculating the taxable part of the Gratuity paid.
5) There are three types of categories under the above cited Section i.e. 1) Government employees (Section 10(10)(i)), 2) employees covered by the Gratuity Act Section 10(10)(ii) and 3) any other employee covered by Section 10(10)(iii).
As referred above in Para 1 that every factory is covered under Payment of Gratuity Act, 1972 whether recognized Gratuity Trust falls under the purview of section 10(10)(ii) or 10(10)(iii) of the Income Tax Act, 1961.
A request is made to clarify the issue for the purpose of calculating the taxable part of Gratuity.
Your early reply in the matter is earnestly solicited.
CAclubindia
