Hi Employers taxed on any gratuity amounts deducted from an employee’s CTC? Thank You In Advance.
From India, Hyderabad
From India, Hyderabad
What do you want to ask or convey? Is it whether gratuity can be deducted from the total cost to company or not? Or whether the amount of gratuity shown in the CTC is taxable or not?
First, there is no such concept called CTC in the eyes of law. Second, no employer will "deduct' gratuity from the remuneration payable to an employee, even though an amount s shown as gratuity as payable at the time of exit subject to some conditions. Third, the amount so mentioned is an amount after all the fixed payments are shown as included in the gross salary, and the same is not reflected anywhere in the form 16 issued by any employer.
From India, Kannur
4250First, there is no such concept called CTC in the eyes of law. Second, no employer will "deduct' gratuity from the remuneration payable to an employee, even though an amount s shown as gratuity as payable at the time of exit subject to some conditions. Third, the amount so mentioned is an amount after all the fixed payments are shown as included in the gross salary, and the same is not reflected anywhere in the form 16 issued by any employer.
From India, Kannur
Hi Sumanth,
As Mr.Madhu stated you should clearly understand the concept of CTC, gratuity and tax thereon. Briefly,
1. CTC is not recognised under Income Tax act
2. Though since '90s, say after IT gained momentum in India employers popularised the CTC among job seekers to make their offers attractive. The CTC is divided in two parts -
i) emoluments included in 'gross salary' as per your 'pay slip' such as basic, DA-FDA/VDA, HRA, conveyance and other allowances which after deductions such as EPF, Prof.Tax, TDS, instalments of advances and other recognised recoveries arrive at 'Net salary payable' which in other words 'your take home pay', gets credited to one's bank a/c, monthly. And part-2-
ii) other employees related costs which are not paid upfront monthly but becomes due for payment as and when due/payable- These components are generally known as 'non-cash (employees related) costs' to the employer. They are-
(a) employer's matching contribution to employees' EPF/EPS/ESI a/c
(b) leave salary- ie., normally salary is paid monthly when employees avail any approved leave, but when certain amount of leave encashed either during the service or when separated.
(c) gratuity- employer's contribution to the gratuity fund/LIC or any other approved funds. Though gratuity is not paid in cash monthly to the employees but as per accounting norms the liability to gratuity on accrual basis annually has to be accounted every year.
(d) premium payable for and behalf of employees towards 'mediclaim insurance', if any, etc.
Pl.understand while Part-i is paid to employees monthly but part-ii components not paid monthly but they are accounted monthly, annually as due by employers concerned.
As you may know 'gratuity' is payable to the employee leaving the employment only after 5 yrs of continuous service. But no income tax is deducted thereon except when the sum of gratuity, as and when paid the employees concerned, exceeds the maximum limits prescribed under TDS under income tax act. No tax is deducted from employers on gratuity thus paid by them.
From India, Bangalore
As Mr.Madhu stated you should clearly understand the concept of CTC, gratuity and tax thereon. Briefly,
1. CTC is not recognised under Income Tax act
2. Though since '90s, say after IT gained momentum in India employers popularised the CTC among job seekers to make their offers attractive. The CTC is divided in two parts -
i) emoluments included in 'gross salary' as per your 'pay slip' such as basic, DA-FDA/VDA, HRA, conveyance and other allowances which after deductions such as EPF, Prof.Tax, TDS, instalments of advances and other recognised recoveries arrive at 'Net salary payable' which in other words 'your take home pay', gets credited to one's bank a/c, monthly. And part-2-
ii) other employees related costs which are not paid upfront monthly but becomes due for payment as and when due/payable- These components are generally known as 'non-cash (employees related) costs' to the employer. They are-
(a) employer's matching contribution to employees' EPF/EPS/ESI a/c
(b) leave salary- ie., normally salary is paid monthly when employees avail any approved leave, but when certain amount of leave encashed either during the service or when separated.
(c) gratuity- employer's contribution to the gratuity fund/LIC or any other approved funds. Though gratuity is not paid in cash monthly to the employees but as per accounting norms the liability to gratuity on accrual basis annually has to be accounted every year.
(d) premium payable for and behalf of employees towards 'mediclaim insurance', if any, etc.
Pl.understand while Part-i is paid to employees monthly but part-ii components not paid monthly but they are accounted monthly, annually as due by employers concerned.
As you may know 'gratuity' is payable to the employee leaving the employment only after 5 yrs of continuous service. But no income tax is deducted thereon except when the sum of gratuity, as and when paid the employees concerned, exceeds the maximum limits prescribed under TDS under income tax act. No tax is deducted from employers on gratuity thus paid by them.
From India, Bangalore
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Circular No 1-2018 Processing of income-tax returns under section 143(1) of the Income-tax Act .pdf
P-TAX.csv