Approved Gratuity Fund – Section 2(9) | Income-tax Act, 2025 vs 1961

§ 2(9) · Income-tax Act, 2025

Approved gratuity fund

ITA 2025 · 2(9) ITA 1961 · 2(5)
Definition — Section 2(9)

Means a gratuity fund which is approved and continues to be approved by the approving authority as per Part B of Schedule XI of the Income-tax Act, 2025. To receive and retain approval, the fund must be: (1) established under an irrevocable trust in connection with a trade or undertaking carried on in India with at least 90% employees employed in India; (2) created solely to provide gratuity to employees on retirement at or after a specified age, on incapacitation, on termination after minimum service, or to widows, children or dependants on death; (3) supported by employer contributions; and (4) structured so that all benefits are payable only in India. The approving authority may withdraw approval at any time if conditions cease to be satisfied, after giving trustees a reasonable opportunity of being heard.

Act Comparison
Income-tax Act, 2025
2(9)
Approved gratuity fund
Income-tax Act, 1961
2(5)
Approved gratuity fund
Key Points
  • Mirrors Section 2(5) of the 1961 Act
  • Employer contributions to approved gratuity funds are deductible
  • Approval must be maintained — lapsing approval changes tax treatment
  • Structural change in 2025 Act — approval rules moved from Part C of Fourth Schedule (1961 Act) to Part B of Schedule XI (2025 Act), though the approval mechanism remains substantially the same
💡 Practical Note

Gratuity received from an approved fund enjoys tax exemption — full exemption for government employees and subject to prescribed limits for others. Approval must be maintained continuously; lapsing approval changes the tax treatment of both employer contributions and gratuity payments.

Published by Simplified Tax India — Clear, section-wise comparison of Income-tax Acts. ← Back to Section 2 Definitions Table
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