Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
Dear Friends can we deducted tax on Gratuity, Earned leave and paid notice period money in case of termination of any employee
You cannot deduct tax from gratuity, since it is not taxable.
1. Notice period - yes
2. Gratuity - depends on length of employment and the company policy on payment of gratuity.
a. If you follow the Payment of Gratuity Act, gratuity up to INR 10,00,000 can be exempt.
b. If the gratuity provision is voluntarily adopted by your company and paid prior to crossing the caveat period of the 5 year (4 year 240 days) caveat, to every employee ceasing employment, it would be taxable.
3. Leave Encashment - Taxable, in accordance with the Income tax Act, in a normal case. If the employee provides no-claim certification, it can be exempt up to INR 300,000.

Yes you can deduct tax from Gratuity, Leave Encashment and Notice Pay amounts payable to a terminated employee.
All these components are Income under the Salary as per the Income Tax Law.
Gratuity is not taxable if it is upto Rs. 10 lacs. Any amount over Rs. 10 lac shall be taxable.
Leave Enchasment and Notice pay is fully taxable.
You have to add them to the salary for the financial year and then work out the tax on it.
If you need any professional help, please connect with us.

This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.






About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service



All rights reserved @ 2020 Cite.Co™