Gratuity v/s Approved fund

[Naveen gawri]

Are We required to open Gratuity fund & Get it approved from CIT incase we have taken insurance against gratuity liability from LIC. ?

[CAGOPALJI AGRAWAL]

The contribution towards LIC gratuity fund by the employer is eligible for deduction as very well laid down in the judgement of the apex court in the case of Commissioner of Income Tax, Coimbatore Versus M/s Textool Co. Ltd. 2009 -TMI - 35070 - SUPREME COURT.

AI Summary

Gratuity fund deduction permitted where employer contributes to an approved insurance-based gratuity arrangement enabling tax deduction. Whether an employer must open a separate gratuity fund and obtain approval when gratuity liability is insured; employer contributions to an insurer-administered gratuity fund (such as LIC) are eligible for deduction, the reply relying on apex court authority confirming deductibility of contributions toward insurance-based gratuity arrangements.