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Gratuity

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Querist : Anonymous

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Querist : Anonymous (Querist)
08 February 2013 Please explain the meaning of dearness allowances.
Also the meaning of taxability gratuity received by an employee under Payment of Gratuity Act . Why is there a distinction when calculating tax liability.

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CA PARAS BAFNA

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CA PARAS BAFNA (Expert)
08 February 2013 Dearness Allowance is generally given to the employees for meeting the higher and increasing cost of living.
.
Part or % of it may be considered for retirement benefits as per the service agreement between e&e.
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Gratuity:
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There is a difference in a branded item and a general unbranded item. Payments made by the registered employers under the Gratuity Act are governed by the act and according to the norms set by the PG Act -contributions are made, to maintain the coherence between the Two Acts (IT & PG), such receipts are exempt. Only extra contribution results in taxable gratuity.
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