Section 40A(7) - Provision for payment of Gratuity

Provision for gratuity: only payments to approved funds or actual/ accrued gratuity are deductible under income tax rules.

Deduction for provisions for payment of gratuity is disallowed unless paid into an approved gratuity fund; gratuity actually paid or accrued as payable in the year (including split payments where no prior deduction claimed) is allowable; contributions to approved funds are excepted; insurance premiums for providing gratuity may be deductible under general expense rules while premiums securing statutory gratuity liabilities fall within the non deductible gratuity provision; transfer of gratuity entitlement to a new employer on termination is treated as payment for deduction purposes.