IMG-20230220-WA0086

GTFC is a Leading Corporate Consulting Firm, providing End to End Solutions for Employee Benefits Actuarial Valuations and Trust Formations Solutions. In past 15 years, we have provided our solutions to more than 1000 clients. Our Actuarial Valuation Solutions are availed by India Most Reputed Multinational and Indian Companies at the End of each Financial Closing, whereas Gratuity Trust solutions are availed by Companies for getting the Tax Benefits under Section 36 1 (V) and 10 25 (iv) which is not available to companies when they made the provision of Gratuity Liability in their Bools of Accounts.

The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC's, Private Schools, Private Colleges, Private Universities, NGO's, Autonomous Bodies and Other business entities) having more than 10 employees

Gratuity is a statutory right of employee whoever completes 5 years in the same Establishment and is a terminal benefit, it means gratuity amount will be determined when the monthly terminal wages of the employee are known to Establishment. The cost is to be borne by the Employer and not by the Employee hence it can neither be shown as deduction from employees salary nor as a Part of CTC of employee until it is actually paid or contributed to a Valid Gratuity Insurance Scheme under Irrevocable System. Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,- 

(a) on his superannuation, or 

(b) on his retirement or resignation, 

(c) on his death or disablement due to accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement '.

The payment of gratuity is to be made by the ESTALISHMENTS within 30 days from the date of exit of employee (Refer Section 7 of the Payment of Gratuity Act, 1972). 

For effective management of gratuity payment to the employees and comply with requirement of Accounting of Gratuity as per Accounting Standards (i.e. AS 15 (Revised 2005) and IndAS 19) in the Balance Sheet, ESTALISHMENTS are required to do following tasks :-

I.                Maintain the Gratuity Nomination Forms (i.e. Form F) and

II.              Make the provision of Gratuity in their balance sheet based on the Actuarial Valuation Report issued by a Practicing Actuary in the Area of Employee Benefits. Gratuity as a Benefit falls in the category of Employee Benefit and Its Accounting and Disclosure requirements laid down in following Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) – 1 . Accounting Standard 15 (Revised 2005) & 2. IndAS19

Actuarial Report in compliance of the above 2 Accounting Standards for making the provision of Gratuity Liability in Financial Statement at the end of each Accounting Period is a mandatory requirement for all Private Schools, Private Colleges, Private Hospitals, NGO's, Charitable Trusts, Private Listed Companies, Private Unlisted Companies, Private Multinational Companies with 10 or more employees operating in India. The compliance of above accounting standards is observed by the Auditors of the Companies and Quality of the compliance of above Accounting Standards by the Auditors is further checked by the NFRA (National Financial Reporting Authority)

Apart from Actuarial Valuation requirement as per Accounting Standards, ESTABLISHMENTS operating in the following 3 States are required to Obtain a Compulsory Gratuity Insurance as per provisions of Section 4A of The Payment of Gratuity Act, 1972 and Register themselves in Form I/FORM II with the Controlling Authority (i.e. DLC Office of their Jurisdictions) and get an Approval from CIT as per provisions of the PART C Of Fourth Schedule of Income Tax Act, 1961 for Approved Gratuity Fund and maintain the FORM III (Gratuity Nomination Form):-

1. Andhra Pradesh

2. Telangana

3. Karnataka

In case of Non Compliance above provisions of THE PAYMENT OF GRATUITY, 1972. The following penalties are imposed on the ESTABLISHMENTS as per provisions of Section 9 of the Payment of Gratuity Act, 1972. The extract of the same is produced below:-

Section: 9 Penalties.

 (1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees or with both. 

(2) An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made there under shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both:

Provided that where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than [36] [Six months but which may extend to two years] unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition 01; a fine would meet the ends of justice.  

In case of any query/clarification you can connect our team at 9818322186, 9211637063 & 011-45261651 or email it to us at tikaramchaudhry@gmail.com, tikaramchaudhary@gratuitytustfund.com