Gratuity Trust Fund Consultant

Our Firm Gratuity Trust Fund Consultant - GTFC is headed by Mr. Tikaram Chaudhary, he has almost 14 years of experience and specialization in providing End to End Consultation for Formation of Gratuity Trusts and related matters as per various provisions of Fourth Schedule of Income Tax Act, 1961 & relevant Acts/Rules. These Gratuity Trusts are formed by the most reputed Indian & Multinational Companies as per provisions of in terms of Part C of Fourth Schedule of Income Tax Act, 1961 for getting the Tax Benefits available under Section 36 (i) (v) and 10 (25) (iv) of Income Tax Act,1961. GTFC is a Leading Corporate Consulting Firm served more than 500 Most Reputed Indian & Multinational Companies with Actuarial Valuations, Legal, Gratuity Insurance and Gratuity Trust Investment Solutions for Management of Employee Benefit (i.e., Gratuity, Leave Encashment, Pension, PRMB etc.). GTFC is actively involved in providing End to End Consultation for effectively implementing Legal and Accounting Compliances the Payment of Gratuity Act,1972, The Payment of Gratuity Rules & Accounting Standards (AS 15 Revised 2005, IndAS 19 & IAS 19-IFRS) applicable on Indian & Multinational Establishments. The details of Legal and Accounting Compliances related to Gratuity Benefits are as under:

1. Legal Compliances

The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC’s, Schools and Other business entities) having more than 10 employees. For the purpose of effectively implementing the Payment of Gratuity Act, 1972, the following compliances are imposed on Establishments by the Competent Authority (i.e., Deputy Labor Commissioner) Regulating the Provisions of the Payment of Gratuity Act, 1972: -

A) Registration of Establishment (i.e., Submission of Form A – Notice of Opening in DLC Office)
B) Maintenance of Records Nominees of Employees in Form F (i.e., For payment of Death Gratuity)
C) Maintenance of Records other Forms as prescribed in Rule 3 to 6 of the Payment of Gratuity Rules
D) Compulsory Gratuity Insurance.
E) Establishment of the CIT Approved Gratuity Trust for Compulsory Gratuity Insurance
F) Investment of Gratuity Trust Money into Compulsory Gratuity Insurance through Group Gratuity Schemes of Insurance companies such as:
- i. LIC
- ii. SBI Life
- iii. HDFC Life
- iv. Kotak Life
- v. Future Generali
G) The Process of Establishment of Gratuity Trust for Compulsory Gratuity Insurance requires Establishment to Involve in following process: -
- i. Vetting of Board Resolution for Gratuity Trust Formation,
- ii. Vetting of Gratuity Trust Deed,
- iii. Vetting of Gratuity Trust Rules &
- iv. Vetting of Application for Approval from CIT in terms of Rule 109 of Income Tax Rules, 1962
The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC’s, Schools and Other business entities) having more than 10 employees. For the purpose of effectively implementing the Payment of Gratuity Act, 1972, the following compliances are imposed on Establishments by the Competent Authority (i.e., Deputy Labor Commissioner) Regulating the Provisions of the Payment of Gratuity Act, 1972: -
- i. Change in Name of Trust,
- ii. Change in Address of Trust,
- iii. Change in Trustees,
- iv. Change in Investment Pattern of Gratuity Funds from 1 Insurer to another
- v. Change in Benefit Formulae for Gratuity Benefits
- vi. Change in Retirement Age of Employees
- vii. Change in Object of Trust
- viii. Change in Trust Rules
- ix. For winding up of Trust due to winding up of the Company
- x. For Transfer of Gratuity Fund from one Trust to another in Event of Merger or De-merger
H) All matter related to Old Gratuity Trusts and Group Gratuity Schemes such as Vetting work of Deed of Variations, Application, Board Resolution and Application to Bank, LIC & CIT in various events such as Merger, De-merger, Acquisitions etc.

2. Accounting Compliance

As per provisions of Section 129 of the Companies Act 2013, Indian and Multinational Companies Operating India needs to prepare the Financial Statement such as Balance Sheet & Profit/Loss Accounts at the closure of each financial year in compliance of Accounting Standards as stipulated in Section 133 of the Companies Act 2013, so that they can give a true and fair view of state of affairs of the company. Accounting and Disclosure requirements for Employee Benefits Plans is laid down in the following 2 Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI): -

A) Indian Accounting Standard for Accounting of Employees Benefits INDIAN GAAP- AS-15 (Revised 2005) IndAS-19
B) Global Accounting Standard for Accounting of Employees Benefits International Accounting Standard (IAS-19 Revised 2011) of the IFRS US GAAP – (FAS-87, 88 & 158) etc.
Generally, Actuarial Valuations for compliance above Accounting Standards are required for following Employee Benefit Plans under: -
- a. Actuarial Valuation for Gratuity Plans,
- b. Actuarial Valuation for End of Service Benefit Plan,
- c. Actuarial Valuation for Earned Leave Plan,
- d. Actuarial Valuation for Sick Leave Plan,
- e. Actuarial Valuation for Defined Benefit Pension Plans,
- f. Actuarial Valuation for Post-Retirement Medical Benefit Plan,
- g. Actuarial Valuation for Settlement Allowances on Retirement,
- h. Actuarial Valuation for Long Service Award Plans/Incentive Plans,
- i. Actuarial Valuation for Interest Rate Guarantee for Exempted Provident Funds,
- j. Actuarial Valuation for other Defined Benefit,
Most frequently used terms used in Actuarial Reports in compliance of the above standards are: -
- i. Present Value of obligation.
- ii. Interest Cost.
- iii. Current Service Cost.
- iv. Service Cost
- v. Past Service Cost.
- vi. Curtailment Cost
- vii. Settlement Cost
- viii. Service Cost.
- ix. Benefit Paid.
- x. Actuarial Gain/loss
- xi. Experience adjustment
- xii. Other Comprehensive Income.
- xiii. Defined Benefit Obligation.
- xiv. Statement of Profit/loss.
- xv. Interest Rate for Discounting.
- xvi. Salary Escalation Rate.
- xvii. Withdrawal Rate
- xviii. Mortality Rate, etc.
The Actuarial Valuations are required by the Indian Companies in following events :-
- * For making the Initial & Annual Contribution into Gratuity Trust Account.
- * Annually, Half Yearly and Quarterly for making provision of Gratuity Liability in BS as Accounting Standards (i.e. AS 15 Revised 2005) and IndAS 19) per Section 133 of the Companies Act, 2013
- * On The Date of Transfer of Employees from One Company to Another
- * On the Date of Acquisition
- * On the Date of De-merger
- * For assessment of Actuarial Liability for Taking Grant from any Ministry.