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of <h1>Income Tax Act Section 40A(7): Gratuity deductions allowed only for approved funds and specific payment conditions.</h1> Section 40A(7) of the Income Tax Act addresses the provision for gratuity payments. Deductions for gratuity provisions are only allowed if the gratuity fund is approved. If an employee retires and gratuity is paid in the current year, it is deductible if no prior deduction was claimed. Even if part of the gratuity is paid later, it is deductible if no previous deduction was taken. Contributions to an approved gratuity fund and provisions for gratuity payable during the year are exceptions. Premiums paid to LIC for gratuity policies are not deductible. Gratuity transferred to a new employer upon termination is considered paid, allowing for deduction.
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