How Companies Can Save Tax upto 32.50% by Formation of Gratuity Fund under Irrevocable Trust?

Tikaram Chaudhary | Last updated: 11 November 2025

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Indian companies can significantly reduce their tax burden by up to 32.50% through the formation of a gratuity fund established as an irrevocable trust and approved by the CIT. This allows companies to claim the gratuity liability as an annual expense, which would otherwise be disallowed for tax purposes. By transferring the provision amount to the trust, not only is this amount deductible, but any interest earned on the fund is also tax-exempt.

In the Indian context, most reputed Indian and multinational companies can save tax up to 32.50% by forming a CIT-approved gratuity fund under irrevocable trust and investing the initial and annual contribution equivalent to the provision of gratuity liability in the balance sheet annually (refer to

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About the Author

Tikaram Chaudhary

Founder GTFC

Profile of Our Firm - GTFC GTFC is an Indian Corporate Consulting Firm based in Capital of India - Delhi and founded by Mr. Tikaram Chaudhary. The Firm registered with Ministry of Micro, Small Medium Enterprises with Registration Number - UDYAM-DL-11-0013795. The Firm has a team of professionals with decades of exper ... Read more

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