My client is a private limited company and he pays gratuity to employees to are eligible from his current revenue. they are nor members of any group gratuity fund. Is the payment made to any employee allowed as an expense in the year of actual payment. Considering that the amount is actually for the period of last five years before resignation and not of that year alone. Meaning no provisions have been made earlier.
In the case of Gratuity it is allowable as Provision. If provided then you have to pay within specified time.
That is why Gratuity is termed as expenses when actually paid.
However, in case of approved trust for Gratuity Fund the employer get its liability valued from Actuary and contribute every year. And in turn the Gratuity is paid to leaving employee from Trust Fund.
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