Tds on gratuity

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This query is : Resolved

Kamlesh Shyamlal Khanwani (Querist)

16 April 2012 Dear All,

If gratuity is paid by LIC of India out of fund maintained by the employer of the employee with LIC of India. Is TDS attracted on such gratuity payments? If Yes, Who is supposed to deduct TDS on such payment of gratuity made? whether the employer or LIC of India.

It may be noted that the employee is receiving the gratuity benefit directly from the LIC of INdia out of fund.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

16 April 2012 Basically. Gratuity in excess of the limits prescribed is added in salary income and employer only is responsible for deduction of tax on Salary Income.
LIC will not deduct TDS. However, the amount is deposited on the basis of actuarial valuation basis and it is maintained to that extent on which no tax is required to be deducted.

Let us see the procedure of Claim settlement by LIC:

1. On the exit of an employee due to retirement / death/ resignation, trust may prefer a claim from LIC by sending a claim form.

2. Claim amount will be made available to trustees. Trustees can have the following options-

a. Preferring a claim from LIC and paying to employee
.
b. Paying the money to employees and seek reimbursement
.
c. Paying claims to employees at their end and seeking annual reimbursement.
.

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