IS Professional Tax is applicable for Gratuity Payment

Ask the Community Statutory Compliance
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Dear Team,

We need more clarification on professional tax whether it is applicable for Gratuity payment or not .

Kindly do let us know.

Find the link where it is telling that professional tax karnataka is not applicable / exempted for Gratuity payment.

Thanks in Advance

Madhu R
Financial Analyst

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Profession Tax is calculated on actual Salary/Wage paid to employee including incentives & Bonus.

But it is not to be deducted on payment of Gratuity.

’salary’ or ‘wage’ includes pay or wage, dearness allowance and all other remunerations received or receivable by any person including any amount received by way of arrears of salary or bonus by whatever name called whether payable in cash or kind and also includes perquisites and profits in lieu of salary as defined in section 17 of the Income Tax Act, 1961.

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Hi,

No , Gratuity is not taxable under the Professional Tax ., but again it varies state to state applicability.

Thanks.

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Hi @Madhu

It’s a tricky question to answer but will try my best with knowledge gained from experts :slight_smile:

Professional tax is something falling under the local governance and is recurring in nature - widely varies from state to state and there are some regions which do not have PT deductions too.

On the other hand ‘Gratuity’ is a central act and a conclusive one or once in a period payment where even the Supreme Court of INDIA has limited liabilities.

Now, considering this circumstance Gratuity is usually not considered for PT - because of its local governance and non-availability in some regions, where a central act cannot be merged.

Because of this special privilege, it even gets an IT exemption and stands as a benefit for the employee.

You may ask? is this mentioned in the law? State / local governance is very rarely mentioned in the central acts that too in the retirement (or) one-time payment acts, with Gratuity being a central act overruling all the other state acts it was not considered as a point while amendment.

And PT tends to change from state to state/region to region and is not uniform across INDIA.

This is a little tricky but logically this is the reason why PT (local governance) is not considered/merged along with Gratuity (central act) which is uniform across INDIA.

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And @MadhuAppreciate your effort and thanks for raising this question.

Wish to see you contributing more to the community and help others in the coming days :slight_smile:

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Thank you Ankit

Your advice helped me a lot

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Hi Arpana

Thanks a lot

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Hi Dinesh

Your logic and tricky answer was very much satisfied and help me a lot

Thanks a lot.

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Hi Dinesh

Sure will post more & more questions

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