Taxability of excess provision of gratuity written back

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This query is : Resolved

Sumit Gaur (Querist)

29 June 2015 If excess provision of gratuity has been created then we are required to written it back & book in P&L, So due to this, the profit will increase & in calculation of income tax it will be consider because book profit is taken in calculation under the head PGBP.

So i just want to know, whether tax is to be charged on such profit which was increased due to written back of excess provision of Gratuity.

Thanks & Regards
Sumit Gaur

CA. Sunil Gokhale

CA. Sunil Gokhale (Expert)

29 June 2015 Book profit is not taken for computing taxable income under PGBP. Provision for gratuity is not allowed as deduction and therefore any reversal of provision will not affect tax liability.

Sumit Gaur

Sumit Gaur (Querist)

30 June 2015 Dear Sir,
In our 1st Step,
Book profit is taken,Then certain disallowances & allowances are given.
And porvision for gratuity is not allowed.

So Reversal of Gratuity is included in Profit, i.e. Tax shall be calculated after all the adjustment, So Please let me know how we can save the tax upon reversal of gratuity.

CA. Sunil Gokhale

CA. Sunil Gokhale (Expert)

30 June 2015 Even if you start with book profit the excess provision for gratuity will be deducted as it is not income hence there is no question of saving tax as it is not included in taxable income at all.

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