Deductions available for gratuity fund and its provisions

Tax queries 2236 views 1 replies

I have some confusion in Deductions and Disallowances from Gratuity and its Provision.

 

Here are few things I know about Gratuity - Allowances and Disallowances

1. Employer's Contribution to Approved Gratuity Fund is Deductible u/s 36(1)(v)  and Contibution to unapproved Gratuity Fund is not deductible.

2. Employees's Contribution to Welfare Fund (G Fund) is Deductible for employer if payment is made in due time u/s 36(1)(va)

3. Provision for Contribution to Approved or Unapproved Gratuity Fund is deductible u/s 37(1)

4. Provision for Payment to Employees these Funds Back is not deductible [Sec. 40A(7)]

 

My Queries :

1. Is Gratuity fund also a Welfare Fund ? If yes, does it include both Gratuity Fund - Approved as well as Unapproved and If no , then employees contribution to Gratuity Fund is deductible in hands of Employer - Yes or no ?

2. If there is any mistake in my views please rectify it.

Replies (1)

In Gratuity we dont have anything like employee contribution. And also Section 36(1)(va) talks only about payment made to PF, ESI and super annuation fund etc.

So i think in your case only super annuation fund is referred as Welfare fund

And when it comes to the disallowance of gratuity,

Unapproved gratuity fund: The entire contribution made by the co. will be disallowed.

Approved gratuity fund: Out of the total amount charged to P&L A/c only the payment made towards the gratutiy fund will be allowed as deduction

 


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