Payment of interest under payment of gratuity act, 1972.

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Pratiksha

None

56 Points Joined November 2012

Hi everybody, I have a confusion regarding the payment of interest under The Payment of Gratuity Act, 1972. As per sec 7, "If the employer fails to pay the gratuity within 30 days of it becoming payable, he shall be liable to pay simple interest....". While sec. 8 states, "The employer shall also be liable to pay compound interest...". What am I missing here? Could somebody please explain what to make of the contradiction? Thanks.

Replies (2)

Deepak Gupta

CA Student

15932 Points Joined May 2011

Originally posted by : Pratiksha
	Hi everybody, I have a confusion regarding the payment of interest under The Payment of Gratuity Act, 1972. As per sec 7, "If the employer fails to pay the gratuity within 30 days of it becoming payable, he shall be liable to pay simple interest....". While sec. 8 states, "The employer shall also be liable to pay compound interest...". What am I missing here? Could somebody please explain what to make of the contradiction? Thanks.

Simple interest applies as per sec. 7 when delayed payment is made by the employer whereas compound interest applies as per sec. 8 when payment is not made by the employer at all and recovery process is initiated.