PAYMENT OF GRATUITY ACT, 1972 APPLICABILITY : On Employers with ten or more Employees

PAYMENT OF GRATUITY ACT, 1972

APPLICABILITY : On Employers with ten or more Employees

GROUP GRATUITY SCHEMEGROUP GRATUITY SCHEME

GRATUITY: A Lump Sum Benefit 15 days’ salary for each year of completed service Service of 6 months or more taken as one year Maximum amount, Rs. 3.5 lakhs

WHEN PAYABLE:

On Death or disablement On Retirement or Superannuation On Resignation



Minimum service condition of 5 years does not apply in

case of death or disablement

Gratuity Act specifies minimum payable gratuity. An employer may pay more than it

PAY-AS-YOU-GO PAY-AS-YOU-GO (PAYG)(PAYG)

FUNDINGFUNDING


METHODS OF MEETING METHODS OF MEETING THE LIABILITYTHE LIABILITY

METHODS OF MEETING METHODS OF MEETING THE LIABILITYTHE LIABILITY

Sound financial Principles require advance funding

Liquidity or cash flow problems may arise in future, if not

funded

Overstatement of profit for taxation purpose hence advancement of tax, if not funded

Security for employees


ADVANTAGES OF FUNDINGADVANTAGES OF FUNDING

Flexibility of contributions

Trustees relieved from investment of funds

Full liquidity


FUNDING THROUGH LIC’s FUNDING THROUGH LIC’s GROUP GRATUITY SCHEMEGROUP GRATUITY SCHEMEFUNDING THROUGH LIC’s FUNDING THROUGH LIC’s GROUP GRATUITY SCHEMEGROUP GRATUITY SCHEME


Attractive experience based yield

100% security of capital

Additional death cover based on prospective service at a nominal cost

FUNDING THROUGH LIC’s GROUP GRATUITY SCHEME FUNDING THROUGH LIC’s GROUP GRATUITY SCHEME (Contd..)(Contd..)

ACTUARIAL VALUATION

CERTIFICATE AS PER AS - 15

DOCUMENTATION AND LEGAL ADVICE

ADMINISTRATION

YEAR END FUND ACCOUNT WITH FULL DETAILS


ADDITIONAL SERVICES AT NO SEPARATE COST


STEPS FOR INSTALLATION OF SCHEME

STEPS FOR INSTALLATION OF SCHEME

DECIDE TO FUND (BOARD RESOLUTION)

APPOINT THE TRUSTEES

DRAFT AND EXECUTE TRUST DEED AND RULES

CREATE A FUND

APPLY TO COMMISSIONER OF INCOME TAX FOR APPROVAL


FOR EMPLOYERFOR EMPLOYER

Annual and past service Contributions are allowed as business expense (Maximum limit is 8 1/3% of Annual Salary in respect of each member). (Section 36(1)(v))

Past Service contributions may be paid in lumpsum or in instalments (maximum five)

Interest Income received by the trust is exempt from Income-tax (Section 10(25)(IV)

FOR EMPLOYEESFOR EMPLOYEES

Contribution paid by an employer is not treated as an income in the hands of the employee

Gratuity amount is not taxable upto Rs. 3,50,000/- (Section 10(10)(iii))

Amount payable on death of the member is not taxable


Documents

PAYMENT OF GRATUITY ACT, 1972 APPLICABILITY : On Employers with ten or more Employees