Page 96 - IC23 life insurance application

THE EMPLOYER

1) In term of Section 36 (i) (v) any sum paid by an employer by way of contribution

towards approved gratuity fund is allowed as a deductible expense for the

purpose of computation of profits & gains of business or profession.

2) The ordinary annual contribution payable by the employer to a fund shall be

made on reasonable basis and shall not exceed 8 1/3% of the salary of each

employee.

THE TRUSTEES

The Interest income received by the Trustees on the investments belonging to

privately managed funds is exempt from tax. If the trustees have paid the

contribution to LIC as premium there is no question of Interest Income and tax relief

does not arise.

THE EMPLOYEE

(a) The Employer's contribution to the Gratuity Fund will not be regarded as Taxable

perquisites in the hands of the employees (This concession is given by the CBDT

in the form of a ruling)

b) In terms of Section 17 (i) (iii) any gratuity received by the employee is regarded

as a salary income and taxed as such. However Section 10 (10) provides relief

by granting partial exemption as detailed below.

1. Any gratuity received under the Payment of Gratuity Act 1972 and

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