XYZ is a public limited company. It has a wholly-owned subsidiary. I was working in the public limited company. Then, due to less workforce in the subsidiary company, 40 employees were shifted to the subsidiary company. Will my number of years worked in the holding company be counted for gratuity exemption for income tax? Will it be included in the 5 years for exemption? Are there any case laws where employees are eligible to claim exemption, and the period of the main company is also counted?
Acknowledge(0)
Amend(0)
Acknowledge(0)Amend(0)
When it comes to gratuity exemption for income tax purposes, the number of years worked in the holding company can be counted under certain conditions. Here are some key points to consider in this scenario:
- The Payment of Gratuity Act, 1972, governs gratuity payments in India. According to the Act, an employee is eligible for gratuity after completing at least 5 years of continuous service with the same employer.
- In the situation described, where employees are shifted from a public limited company to its wholly-owned subsidiary, the period of service in the holding company can be considered for gratuity exemption if certain conditions are met.
- To be eligible for gratuity exemption, the transfer of employees to the subsidiary company should be a part of a genuine business restructuring or reorganization, and the terms of employment should remain consistent.
- The Income Tax Act allows for gratuity exemption up to a certain limit based on the number of years of service. If the transfer to the subsidiary is recognized as a continuation of service from the holding company, the years worked in the holding company can be included in the total service period for gratuity exemption.
- It is essential to maintain proper documentation and evidence to support the continuity of service between the holding company and the subsidiary for gratuity exemption purposes.
- While there may not be specific case laws addressing this exact scenario, the interpretation of labor laws and tax regulations can support the inclusion of the years worked in the main company for gratuity exemption if the transfer is deemed genuine and in the normal course of business.
In conclusion, the years worked in the holding company can potentially be counted for gratuity exemption if the transfer to the subsidiary is recognized as a continuation of service without any break in employment terms. It is advisable to seek guidance from legal and tax professionals to ensure compliance with relevant laws and regulations.
From India, Gurugram
Acknowledge(0)Amend(0)
35- The Payment of Gratuity Act, 1972, governs gratuity payments in India. According to the Act, an employee is eligible for gratuity after completing at least 5 years of continuous service with the same employer.
- In the situation described, where employees are shifted from a public limited company to its wholly-owned subsidiary, the period of service in the holding company can be considered for gratuity exemption if certain conditions are met.
- To be eligible for gratuity exemption, the transfer of employees to the subsidiary company should be a part of a genuine business restructuring or reorganization, and the terms of employment should remain consistent.
- The Income Tax Act allows for gratuity exemption up to a certain limit based on the number of years of service. If the transfer to the subsidiary is recognized as a continuation of service from the holding company, the years worked in the holding company can be included in the total service period for gratuity exemption.
- It is essential to maintain proper documentation and evidence to support the continuity of service between the holding company and the subsidiary for gratuity exemption purposes.
- While there may not be specific case laws addressing this exact scenario, the interpretation of labor laws and tax regulations can support the inclusion of the years worked in the main company for gratuity exemption if the transfer is deemed genuine and in the normal course of business.
In conclusion, the years worked in the holding company can potentially be counted for gratuity exemption if the transfer to the subsidiary is recognized as a continuation of service without any break in employment terms. It is advisable to seek guidance from legal and tax professionals to ensure compliance with relevant laws and regulations.
From India, Gurugram
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.
Madras HC judg regarding gratuity is applicable if workmen is working 4 years 240 days..pdf