Understanding Gratuity and PF Limits: What Happens When You Exceed the Ceiling?

Hi dear HR professionals,

I have some doubts regarding PF and Gratuity.

1. What is the reason for the ceiling of Rs. 350,000 for gratuity? What may happen if it exceeds this limit?

2. Is there any ceiling for the PF amount to avail Income tax rebate? Normally, we do have a tax rebate for PF amount. If there is any ceiling for the same, kindly assist me.

I am looking forward to your honest reply.

Warm Regards,
Kannan

Dear Kannan,

Every amount contributed towards the Employee's Provident Fund (EPF) from the employee's and employer's end is exempted under the Income Tax. Also, there is no tax on the interest received on the PF amount. The employer is still bound to deduct PF on the salaries of the employees who are drawing salaries less than Rs. 6500 a month. Regarding the gratuity issue, I shall reply to you shortly.

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

Hi Kannan,

We have had a few discussions on the same topic of Gratuity. For your reference, I have attached the link for you to review. Please let me know if you found it useful.

[Link removed]
[Link removed]

Regarding the PF clarification, I agree with Umesh and would like to add that an employee drawing a salary of more than Rs. 6500 can also have PF deducted, provided they agree to the deduction. This means the employer is not obligated by law unless the employee chooses to do so voluntarily.

Other members, please correct me if I am mistaken.

Regards,
Amith R.