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