Thread Started by #hemlata arya

Please advise employer deduct gratuity from employee salary every month - it is under act?
2nd January 2019 From India, New Delhi
Employer is not authorised to deduct any amount from employee pay on account of gratuity.Employer has to cater for likely gratuity payments to employees as per their entitlement as and when due.
He can take LIC policy or from some other insurance company to pay due amounts to entitled employees.
But deducting any amount from employee on a/c of gratuity is illegal
2nd January 2019 From India, Pune
Dear colleague,
It is outright illegal to make deduction from employees' salary when the responsibility is squarely cast on employer to pay it when due and eligible from his funds or through linkage with LIC.
Make a representation to the top person and bring to his notice this grave violation of legal obligation and refrain from this act and also to refund the amount already illegally deducted.
Regards,
Vinayak Nagarkar
HR- Consultant
2nd January 2019 From India, Mumbai
Dear Hmlata
Are you in CTC regime? If yes. Please check it must be notional credit and debit.
Shailesh Parikh
99 98 97 10 65
Vadodara
3rd January 2019 From India, Mumbai
Dear Contributors,
To clarify, Employer can not deduct gratuity contribution from the employee's earnings; however showing the gratuity component as a separate component (benefits) to compute the Total Cost to the Company (TCTC) is a legit practice and is adopted by most of the companies. There is no logic to it, it is just like adding froth to the beer; inflating the Total compensation by adding benefits like Gratuity, insurance etc to make it look more lucrative.
Regards
Rahul Chhabra
3rd January 2019 From India, Delhi
Dear Colleagues,
Gratuity does form part of CTC which is understandable. If the legal responsibility is put on the employer, where is the need for either deduction or notionally showing it as debit and credit. It is forthright ridiculous.
Regrds,
Vinayak Nagarkar
HR- Consultant
4th January 2019 From India, Mumbai
Under Payment of Gratuity Act 1972, payment of Gratuity is responsibility of employer and no contribution from employee.
5th January 2019 From India, Madras
NO-Employer can't deduct from the employee. Insurance can be taken to handover the burden is the wise way to manage .I generally advice to the employer to do so.
Brij Pathak
Manger HR
6th January 2019 From India, Vadodara
Gratuity is given/paid by the employer to his/her employee for the services rendered by him during the period of employment. It is usually paid at the time of retirement but it can be paid before provided certain conditions are met.
A person is eligible to receive gratuity only if he has completed minimum five years of service with an Company/Organisation. However, it can be paid before the completion of five years at the death of an employee or if he has become disabled due to accident or disease.
Business owners will do wrong practice because of their profit.
Regards
Mohan Nair
7th January 2019 From India, Mumbai
Kindly check, is it CTC or Gross Salary? Gratuity is the part of CTC.
7th January 2019 From India, Delhi
It is improper to show Gratuity amount as a part of CTC with the following reasons:
1. There is no monthly outgo payment towards Gratuity against any employee.
2. Gratuity is payable after 5 years continuous service on last drawn salary than how come employer project CTC amount on running salary?
3. If an employer shows Gratuity contribution as part of salary (CTC) then it should be paid to the employee on separation before completion of 5 years service as the so called contribution shown as CTC against gratuity is not payable by employer to the gratuity fund.
4. Companies are availing tax benefit on accrued gratuity amount.
5. As regards to PF, ESI contributions, it is monthly outgo from eligible employees from day one and the monies goes to Govt. Treasury every month. Whereas the gratuity amount they need not pay to the Trust and or LIC every month. Thus showing gratuity amount as CTC in employees offer and or Appraisal in not justified.
Regards,
Suresh
7th January 2019 From India, Thane
Dear Colleagues,
Since gratuity is a cost to the company and legal obligation, it is perfectly alright to show it as a part of CTC just as PF and ESI.
There may not be monthly outgo, but funding provisions have to be made in books of accounts for its future liability.
But what is condemnable is deduction by the Employer towards gratuity from employees' salary every month. It is illegal and if it is not stopped forthwith, he should be dragged before Authorities for serious breach of law and punishable offense.
Regards,
Vinayak Nagarkar
HR- Consultant
7th January 2019 From India, Mumbai
Dear Hemlata,
There are lot of opinion on your query. Let us understand the mathematics behind TCTC/CTC.
Let us consider the TCTC/CTC per annum is INR 3,60,000/- i.e per month INR 30,000/-. Let us also consider the components includes at CTC are - (Basic, HRA, Allowences = Monthly gross) + Employer's portion of PF & ESI(if applicable) + Statutory Bonus (if applicable) + Gratuity + Any other payment proposed to pay the employee.
Therefore, to arrive at monthly gross it is essential to deduct other components i.e from 30,000/- it will be required to deduct Employer's portion of PF & ESI, Statutory Bonus, Gratuity & Any other payment.
Now , we will arrive Basic , HRA & Allowances.
When we offer employment , now a days most of the employers are showing TCTC/CTC . There are Organizations who process pay roll from CTC which is technically wrong. Offering CTC is one part, but when we will process pay roll it should be from monthly gross otherwise confusion will continue.
The offer of the Organization may be (Basic + HRA + Allowances = Monthly gross) * 12 = Yearly gross + Yearly Employer's contribution to PF & ESI + Yearly Statutory Bonus + Yearly Gratuity Liability + Yearly any other liability. Pay roll will be on the basis of monthly gross only.
Trust this will satisfy your query. For further clarification you may cntact me.
Thanks & Regds.,
S K Bandyopadhyay( Howrah, WB)
+91 98310 81531

8th January 2019 From India, New Delhi
Hi,
Yes, it is legal. Gratuity is a part of CTC ( Cost to company). A few companies have Gratuity fund with banks where they deposit gratuity for all employees. Gratuity can be deducted from an employees CTC but not gross salary. Most of the companies now a days prefer keeping everything in CTC so they know their total cost involved on an employee.
Hope thsi helps.
Regards,
Shweta Gehlot
8th January 2019 From India, Delhi
In simplified terms Gratuity should pay (bear cost) by employer/buisiness owner/company/organisation. It should be cost to company (employer) and should not be cost to employee.
Mohan Nair.
8th January 2019 From India, Mumbai
Dear Hemlata,
Employer can show this amount in employee's CTC because this is a part of company expenses for Employee
Regards
CP Singh
9th January 2019 From India, Noida
Dear colleagues,
Those forum members who have opined about gratuity being part of CTC, are missing the core point of the query. The issue is the employer has deducted from the salary of the employees an amount towards the gratuity and query is posed whether this is alright as per the Gratuity Act. Myself and several others have categorically stated that this is illegal.
Regards,
Vinayak Nagarkar
HR- Consultant
9th January 2019 From India, Mumbai
Dear Mr. Vinayak,
Request you to read my earlier posting properly. Gratuity is a part of CTC/TCTC or not is not the problem. Because CTC/TCTC has no legal stand.
It is the problem of processing pay roll. If any organization starts processing pay roll and show it to pay slip from monthly CTC/TCTC level and then deduct the items included in CTC along with Gratuity ,then it will be technical problem to convince any statutory authority. CTC is internal matter of the Organization. If the same Organization process payroll from monthly gross after internally adjusting all deductions from CTC including Gratuity, then question of deducting Gratuity from salary will not arise.
Trust this will satisfy your query.
Thanks & Regds.,
S K Bandyopadhyay
+91 98310 81531

10th January 2019 From India, New Delhi
Dear Mr Bandopadhyay,
Let me correct you that I have no query and I have given my views on the original poster's query. Some colleagues have digressed and opined on gratuity being part of CTC or not which is not what the querist wants.
Regards,
Vinayak Nagarkar
HR- Consultant
10th January 2019 From India, Mumbai
Dear Mr.Vinayak Nagarkar,
I am extremely sorry to mention the sentence "Trust this will satisfy your query"as it was not your query.
Hope you will take it sportingly.
Best Regards,
S K Bandyopadhyay ( Howrah, WB)
+91 98310 81531

10th January 2019 From India, New Delhi
No Employer is not authorised to deduct any amount from employee pay on account of gratuity
10th January 2019 From India, Ghaziabad
No such provision in Act. Employers' liability should not be deducted from Employees' salary/wages. Furthermore Employers' liabilities such as ESI, PF, Gratuity etc. are not to be treated as wages. You may refer payment of wage act.
11th January 2019 From India, Madras
No Employer cant deduct Gratuity from wages, as its total employer responsibility to pay gratuity at the time of separation after 4 years and 240 days or death at any time in the service period.
According to some friends its correct to put in CTC, they are misguiding to other members because for the first year if employee basic is 12000 then his gratuity contribution become 573.00
Next year his basic revised by 13500 than Gratuity become 650.00
Like this, it will increase till the fourth years and maybe 820 Now employee relives after five year and eight months when his basic is 20000 according to it his gratuity calculation should be on 962 on monthly basis for five years means 60+8=68 month
it would be 68*962=65416.00
Not according to the fixed CTC calculation.
So please its HR duty to guide their employer incorrect direction
14th January 2019 From India, Delhi
So don't put gratuity in CTC it can be calculate after the service separation only.
14th January 2019 From India, Delhi
The calculation as shown above is incorrect. If any employee worked for 5 years 8 months i.e 68 months and his last drawn basic is 20,000/- per month, then his gratuity amount will be (20000/26)*15*6 = 69,231/- .
Secondly the consideration that has been made that the money deducted from CTC every month will not be invested properly is not right. Either the money will be invested to any insurance or to be managed by the Gratuity trustee formed by the company.
Whether Gratuity should be part of CTC or not is the Organization's own policy as there is no legal bindings. If it is not part of CTC , question does not arise to deduct gratuity from salary - it is illegal. But if it is part of CTC , it has to be managed professionally otherwise it will also create problem.
S K Bandyopadhyay ( Howrah, WB)
+91 98310 81531

14th January 2019 From India, New Delhi
Dear Colleagues,
As I observe, enough has been said on the original query mostly repeating the same points or digressing without adding much value.
It is time we pull the plug on it if no fresh valuable views are forthcoming.
Regards,
Vinayak Nagarkar
HR- Consultant
14th January 2019 From India, Mumbai
#Anonymous
Pls Refer My OFFER,This legal or illegal Pls find the attached
14th January 2019 From India, Coimbatore

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Employer is not authorised to deduct any amount from employee pay on account of gratuity. Employer has no right to cut it in his/her salary.
15th January 2019 From India, Bhilai
Any deduction which is no at par with the Payment of wages Act is illegal. Aside, the employer has no legal right to deduct the gratuity from his employee. In case there is any agreement to this respect it will be voidable at the instance of the employee and by Court's order.
If your employer is deducting gratuity amount every month, please get those receipts or that deduction should be reflected in your pay-slip, else it will be difficult to prove in the Court of law.
16th January 2019 From India, Kolkata
In a couple of months, I'm sure no one will be online, as all my friends will be watching canadian grand prix 2019 live stream . Exciting!
16th January 2019 From India, Badlapur
From the PAY SLIP you have provided, it is not seen that they have deducted any statutory deduction from your Monthly gross salary which is your real salary to appear on the PAY SLIP. To arrive at the net pay they have deducted only PF contribution (employee's share) from the monthly salary (Monthly Salary Rs. 28519.00 Less PF Rs. 2053.00 Net Pay Rs. 26466.00).
They have provided other benefits on yearly basis like PF, Grtuity. Leave. Bonus and Medical Insurance to arrive at the Cost to Company (CTC).
If during the negotiations if you accepted 4,00,000 as CTC, then the break up seems to be correct except any mathematical mistake.
If you understood Rs. 4,00,000 as your yearly salary (=Monthly salary Rs. 33,333/-) and if the employers offered you Rs. 4,00,000 as yearly gross CTC. then there is mis understanding
M.A.KULKARNI
21st January 2019 From India, Mumbai
Hi All,
Could you please advise whether Gratuity is considered since joining date of the company or Post confirmation date (Which 3 or 6 months post joining ?
Or its depend upon company to company policy which one to be considered.
Regards
Amit
22nd January 2019 From India, Mumbai
From date of joining.
Regards,
Suresh
22nd January 2019 From India, Thane
According to Gratuity Act, Gratuity is a legal Obligation on the shoulders of Employer and It is an additional benefits apart from his Wages. Wages includes all components of Cost to Company. If employer is showing Gratuity as a component of CTC and taking advantage of gratuity part as deductible expense for IT returns, In that case Employer is liable to pay that component as and when employee demands as it is an income for employee in each year when employer shows it as part of employee CTC as employer is taking advantage of Gratuity component as a part of Salary expense whereas Gratuity becomes deductible expense when it is actually paid.
Tikaram Chaudhary
Head Consultant - Group Gratuity Trust Fund and Group Insurance Consultant
9211637063
9211637063
27th January 2019 From India, Delhi
Hi
I had worked in a IT company from 18/06/2013 to 10/12/2018. Monthly gratuity deducted(4.81% of Basic) from my salary as per attached my salary slip. I have worked more than 80 holidays(Sunday's and Govt Holidays) during my Services, I got extra salaries/leave for these extra working days in corresponding month . I have claimed my gratuity after my relieving, they are releasing 5 yearly gratuity to me.
I want suggestions on my below queries
1. Can I eligible for 6 years gratuity as I had worked more than 6 and half year including holidays working?
2. Can I claim gratuity which was deducted from my monthly salary?
28th January 2019 From India, Noida

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Dear Rambir Singh,
1. To qualify for 6 years gratuity you should have worked upto and inclusive of 18th Dec. 2018.
2. You are eligible for only 5 years Gratuity, nothing more.
Regards,
Suresh
28th January 2019 From India, Thane
Yes, You qualify for Gratuity Payment. You can approach your employer. If he denies then you may approach Labour Commissioner of your jurisdiction.
29th January 2019 From India, Delhi
If it is part of CTC employer can deduct gratuity,and pay after completion of 5 years service. While if it is not part of CTC Employer can not deduct.
30th January 2019 From India, Pune
Dear Colleague,
No, whether part or no part of CTC , there is no question of any deduction from salary on account of gratuity. It is legally mandatory that the Employer creates fund for it and pays to eligible employees . It is not contributory in nature unlike PF and ESI. It will be illegal if employer makes any deduction for gratuity from employees' salary and is liable for prosecution for the same.
No misguiding advice pl.
Regards,
Vinayak Nagarkar
HR- Consultant
31st January 2019 From India, Mumbai
Guys you won't believe!! there are few clients who deduct a particular amount per month from his employees and then disburse it as 'statutory bonus' during puja, and the same deduction is also mentioned in their pay-slip! The most tragic; even after making them aware, they chose to behave in dumbest manner!
Sometime being consultant I too want few of those clients should have labour inspection rigorously, because unless a bigger amount is levied or passes a garnishee order for bank account attachment, they will not even move from their chairs!
31st January 2019 From India, Kolkata
Dear All,
There are several opinions from different experts. Let me share with you one offer letter example:-
YRLY
Basic - 2,40,000
HRA - 1,20,000
Allows- 60,000
----------------------
YRLY
GROSS- 4,20,000
-----------------------
EMPLR
PF(13%) - 31,200
GRATUITY- 11,538
BONUS - 7,000
INSURANCE- 5,000
--------------------------
CTC - 4,74,738
----------------------------
PAY ROLL/PAYSLIP
--------------
EARNING
------------
BASIC - 20,000/-
HRA - 10,000/-
ALLWS - 5,000/-
-------------------------
MNLY GR- 35,000/-
--------------------------
DEDUCTIONS
------------------
PF - 2400/-
PTAX- 200/-
TDS - 500/-(SAY)
-------------------------------
TOT DED- 3100/-
-------------------------------
NET SALARY - 31,900/-
-------------------------------
The above is clear indication that offer letter is based on CTC but pay roll/payslip is different. There is nothing wrong in it. It is problem with those Organizations who are processing pay roll from CTC through their soft ware and appearing in pay slip all deductions.
In the above example the Organization will manage the Gratuity Fund through any insurance or by own trustee and Bonus as per Payment of Bonus Act will be paid once in a year in due time. I have observed the same with some MNCs and Good Indian Organizations.
Thanks & Regds.,
S K Bandyopadhyay ( WB, HOWRAH)
+91 98310 81531

-
31st January 2019 From India, New Delhi
Employer has 2 options for payment of Gratuity:-
1. Pay as go option, where employer make the provision of Gratuity of employees working with his organisation his Financial Statement and whenever employee leaves the organisation, he pays it from his own respurces.
2. Funding option, in this method employer create an approved gratuity trust and make contribution to the trust and get the Income Tax benefits for the contribution made by hin in the approved gratuity trust and whenever any employee leaves the organization payment from the Gratuity trust is made.
In both of above cases, gratuity is made from the own resources of employer either from direct payment of gratuity or contribution to the Approved Gratuity Trust
Any deduction from employees salary is not allowed as Gratuity is Legal Obligation and addition benefit that employee get after completion of 5 years except death case where 5 years of completion of Paat Service is not required.
10th February 2019 From India, Delhi
In my opinion, Employer can not deduct Gratuity amount from wages, as its total employer responsibility to pay gratuity at the time of full and final settlement after completion of 5 years of service days. Its a direct retirement or superannuation benefit must given by the employer but compulsion to complete 5 years of service.
Generally this is paid by taking group gratuity schemes by the insurance companies for example LIC group gratuity scheme. Employer has to submit yearly working report of employees with their DOB, DOJ and salary details to the insurance company. After resignation, employer can apply gratuity amount from the insurance company with supporting documents e.g. Resignation Letter and employee record.
16th February 2019 From India, Delhi
Legally there is no provision to deduct gratuity from employee
.
CTC concept is administrative in nature and cannot overule legal provisions.
Gratuity is employer liability and they need to cater as business expense.
Probably Group Gratuity policy can be considered.
19th February 2019 From India, Pune
Kindly guide, if any employee from private organisation leaves job after 3 years,is he eligible for Gratuity amount? The amount is shown as part of CTC in appointment letter.
As per rule, if it due to him after 5 years, what about amount shown in letter? How employee will benefit from it?
7th March 2019 From India, Pune
To understand this concept. let us take an example :-
Monthly Basic Salary of Employee……………2,60,000/-
Increment Rate for Basic Salary .……………10%
Accrued Gratuity Amounts for next 3 years until employee leaves the organization is as under :-
For the First Year…………….……………….. (15/26)*2,60,000*1 = 1,50,000/-
For the Second Year………………………….. (15/26)*2,86,000*2 = 3,30,000/-
For the third Year………….………………….. (15/26)*3,14,600*3 = 5,44,500/-
Employee Point of view :-
1. That his annual CTC Salary is X amount including 1,50,000/-
2. That a deduction of 1,50,000/- is made by the employer from his Annual CTC.
3. That after completion of 5 years, employee will accumulated deducted amount as per the rules and regulations given in the appointment letter.
Employer Point of view:-
1. That employer CTC Salary Offer to employee is inflated by 1,50,000/- on the date of appointment as it is not paid monthly or annually to him.
2. That employer is liable to pay this amount in event unfortunate death of employee.
3. That employer is not liable to pay this amount in event resignation or retirement of employee before completion of 5 years.
4. That employer have saved Rs 5,44,500/- at the end of 3rd year when employee have left the Job before completion of 5 year.
Now point arises about showing Gratuity as part of CTC Salary in appointment letter :-
1. If Appointment Letter shows it as part of CTC (Cost to Company) with waiting condition of 5 years then employee will not be eligible for gratuity benefit until and unless he complete the service of 5 years at the time of resignation and retirement.
2. If Appointment Letter shows it as part of CTC (Cost to Company) without any waiting condition then employee will be eligible for gratuity benefit immediately.
Companies may have some options to manage the Gratuity Benefits.
7th March 2019 From India, Delhi
Dear All,
Those who are eligible to make CTC and can understand CTC, show deduction in CTC is totally fraud. As the name suggest how you can decided before the period. It a fraud with employee and his upcoming jobs. Such employer just show high and pay less in order to attract application and making fool to the new joiners.
Request you all don't do it at your workplace and never support such game with the employees.
because do hard work to earn and someone is needed to run his family.
Although CTC is not defined anywhere in the Indian law.
Beware of such fake employers
Thanks,
8th March 2019 From India, Gurgaon
Dear,
Please check, your CTC structure.
If there is, then it is ok.
You have given consent on the same.
THanks !!
11th March 2019 From India, Delhi
An Overview Gratuity Benefits
Gratuity benefits are governed by "The Payment of Gratuity Act 1972" and paid by the Company to an employee in addition to his salary on exit from the company. It is applicable to all companies having 10 or more employee. 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, or
(c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of 5 years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
Calculation of Gratuity Benefits
Gratuity is a statutory right of employee whoever completes 5 years in the same organization and is a terminal benefit. It means, Gratuity amount will be determined when monthly terminal wages of the employee are known to the company. The terminal wages will include Basic & Dearness allowance only. The Gratuity Benefits are calculated using the following formula:-
(15/26) multiplied by (No of Completed Years on Exit) multiplied by (Terminal Wages)
Factors affecting Gratuity Benefits
Gratuity Benefits changes with the change in the following:-
(a) Past Service of Employee in the Company,
(b) Increase in wages of Employee in the Company,
(c) Change in Benefit Formulae of the Gratuity Benefit due to the amendment in the Act,
(d) Change in Ceiling Limit on Gratuity Benefits due to the amendment in the Act,
(e) Change in Vesting Condition for eligibility of Gratuity Benefits due to the amendment in the Act,
The impact of the above Factors on Gratuity Benefits can be understood by the following Examples :
(a) Change Past Service of Employee in the Company.
Mr. A Joins the Company with a Basic Pay of Rs. 2,60,000/- per month and there is no change in basic salary, only his Past Service Change then Gratuity Payments for the next 5 years will be:-
On Completion of 1 Yr - (15/26)* 2,60,000*1 = 1,50,000/-
On Completion of 2 Yrs - (15/26)*2,60,000*2 = 3,00,000/-
On Completion of 3 Yrs - (15/26)*2,60,000*3 = 4,50,000/-
On Completion of 4 Yrs - (15/26)*2,60,000*4 = 6,00,000/-
On Completion of 5 Yrs - (15/26)*2,60,000*5 = 7,50,000/-
The above amounts are subject to Ceiling Limits on Gratuity Benefits applicable.
(b) Increase in wages of Employee in the Company.
Mr. A Joins the Company with a Basic Pay of Rs. 2,60,000/- per month and there is the change in wages@10%, then Gratuity Payments for the next 5 years will be :-
On Completion of 1 Yr - (15/26)* 2,86,000*1 = 1,65,000/-
On Completion of 2 Yrs - (15/26)*3,14,600*2 = 3,63,000/-
On Completion of 3 Yrs - (15/26)*3,46,060*3 = 5,98,950/-
On Completion of 4 Yrs - (15/26)*3,80,670*4 = 8,78,460/-
On Completion of 5 Yrs - (15/26)*4,18,730*5 = 12,00,788/-
The above amounts are subject to Ceiling Limits on Gratuity Benefits applicable.
(c) Change in Benefit Formulae of the Gratuity Benefit due to the amendment in the Act.
Mr. A Joins the Company with a Basic Pay of Rs. 2,60,000/- per month, His increment in wages@10%, and due to change in the Gratuity Factor as 1/1 from 15/26 then Gratuity Payments for next 5 years will be :-
On Completion of 1 Yr - (1/1)*2,86,000*1 = 2,86,000/-
On Completion of 2 Yrs - (1/1)*3,14,600*2 = 6,29,200/-
On Completion of 3 Yrs - (1/1)*3,46,060*3 = 10,38,180/-
On Completion of 4 Yrs - (1/1)*3,80,670*4 = 15,22,660/-
On Completion of 5 Yrs - (1/1)*4,18,730 *5 = 20,93,660/-
The above amounts are subject to Ceiling Limits on Gratuity Benefits applicable.
(d) Change in Ceiling Limit on Gratuity Benefits due to the amendment in the Act.
Mr. A Joins the Company with a Basic Pay of Rs. 5,00,000/- per month, His increment in wages@10%, and due to changes in Ceiling Limit from 10 Lakhs to 20 Lakhs then Gratuity Payments for the next 5 years will be:-
Case 1 - When Ceiling Limit on Gratuity Payment is 10,00,000/-
On Completion of 1 Yr - (15/26)* 5,50,000*1 = 3,17,308/-
On Completion of 2 Yrs - (15/26)*6,05,000*2 = 6,98,077/-
On Completion of 3 Yrs - (15/26)*6,65,500*3 = 11,51,827/- Company liable to pay 10,00,000/-
On Completion of 4 Yrs - (15/26)*7,32,050*4 = 16,89,346/- Company liable to pay 10,00,000/-
On Completion of 5 Yrs - (15/26)*8,05,255*5 = 23,22,851/- Company liable to pay 10,00,000/-
Case 2 - When Ceiling Limit on Gratuity Payment is 20,00,000/-
On Completion of 1 Yr - (15/26)* 5,50,000*1 = 3,17,308/-
On Completion of 2 Yrs - (15/26)*6,05,000*2 = 6,98,077/-
On Completion of 3 Yrs - (15/26)*6,65,500*3 = 11,51,827/-
On Completion of 4 Yrs - (15/26)*7,32,050*4 = 16,89,346/-
On Completion of 5 Yrs - (15/26)*8,05,255*5 = 23,22,851/- Company liable to pay 20,00,000/-
Case 3 - When Ceiling Limit on Gratuity Payment is 30,00,000/-
On Completion of 1 Yr - (15/26)* 5,50,000*1 = 3,17,308/-
On Completion of 2 Yrs - (15/26)*6,05,000*2 = 6,98,077/-
On Completion of 3 Yrs - (15/26)*6,65,500*3 = 11,51,827/-
On Completion of 4 Yrs - (15/26)*7,32,050*4 = 16,89,346/-
On Completion of 5 Yrs - (15/26)*8,05,255*5 = 23,22,851/-
(e) Change in Vesting Condition for eligibility of Gratuity Benefits due to the amendment in the Act.
In the above examples for (a) to (d), If an employee leaves the company before completion of 5 years then "Nil" gratuity benefit is payable in the following events :
(a) on his superannuation, or
(b) on his retirement or resignation.
Case 1 - When Vesting Condition for eligibility is 3 years, Company will be liable to pay gratuity benefit on completion of 3 years in event of his superannuation, on his retirement or resignation.
Case 2 - When Vesting Condition for eligibility is 2 years, Company will be liable to pay gratuity benefit on completion of 2 years in event of his superannuation, on his retirement or resignation.
Case 3 - When Vesting Condition for eligibility is 1 year, Company will be liable to pay gratuity benefit on completion of 1 year in event of his superannuation, on his retirement or resignation.
Gratuity Benefits are long term benefits and are subject to the above changes, so it becomes mandatory for Companies to make Accounting/Investment for Gratuity Benefits.
In India, The Companies opt "Pay as you go option" for Accounting of Gratuity Benefits in their Financial Statement. In this option Company makes a provision of Gratuity in the Balance Sheet on the accrual basis taking an actuarial report on BS date from an Actuary and as and when an employee leaves the organization, company pay gratuity from their resources and get the tax benefit for the gratuity paid.
In case of Established Indian Companies, they set up a Gratuity Trust and make an annual contribution equivalent to their Accounting Provisions of Gratuity in the "Irrevocable Trust" and avail the tax benefits under Section 36(1)(v) of the IT Act 1961 and create a Corpus in "Irrevocable Trust" which is used exclusively to meet with Companies obligation towards Gratuity Payments as and when employee resigns or retires from the companies.
We have almost 10 years of experience in the computation of Gratuity Benefits as per “ Payment of Gratuity Act 1972” and its Legal, Accounting and Income Tax related aspects for Creation of Group Gratuity Trust Fund with Insurance Companies (i.e.LIC, SBI Insurance etc, etc.) and we have provided consultancy for administration Gratuity Trust Fund/Retirement Trust Fund in various organization in all sectors of Indian Economy on receipt of their Management request and If you wish to know details like:-
1. Who can be covered under Group Gratuity Scheme?
2. Why did companies require to create a Group Gratuity Trust - Decision Making?
3. How can companies administer Gratuity Trust?
4. What are Tax Benefits to Company by setting up Gratuity Trust?
5. What are General Benefits to Employee from a Gratuity Trust Set up by Company ?
6. Where to approach for setting up Gratuity Trust?
7. What is the documentation required for setting up Gratuity Trust?
8. What is the Process of Setting up a Gratuity Trust?
9. Which is beneficial to trustees a Self Managed Investment or Insurance Co. Managed Investment?
10. What is the Accounting requirement for Trustees?
We may also be contacted for other alternate ways the company can choose for the administration of Investment for Retirement Benefits and Long Term Retention Schemes for Productive Employees/Top Management of Companies?
With Regards
Tikaram Chaudhary
Group Gratuity Trust Fund & Group Insurance (Retention Schemes) Consultant
(Experienced Consultant with 10 years of exposure in assessment/valuations of Employees Benefit Liabilities specially Gratuity/Leave Encashment Liabilities & Retention Schemes)
Mobile Number : 9211637063
Blog: http://gratuityconsultant.blogspot.com
Website: https://gratuity-trust-fund-consulta...s.site/?m=true
All Consultancy Services provided by us are subject to terms & conditions will be stated when a consultation job is accepted.
(This article is for information purpose only. It is not intended to constitute, and should not be taken as legal advice, or communication intended to solicit or establish commercial motives with any. The firm shall not have any obligations or liabilities towards any acts or omission of any reader(s) consequent to any information contained herein. The readers are advised to consult competent professionals in their own judgment before acting on the basis of any information provided hereby.)
11th March 2019 From India, Delhi
We offer Advisory Services on receipt of Management request of Indian Companies spread in all Sectors of Indian Economy for the administration of Group Gratuity Trust, Employee Retention Scheme, Long Service Awards Scheme, Change in Gratuity Policy for Benefit Enhancement of Gratuity Payment to Employee as per the Payment of Gratuity Act. 1972 amended. Our Advisory Services covers all aspects (i.e.Legal, Income Tax & Accounting related) for the creation of the Group Gratuity Trust Fund. We have a team of experts having decades of experience in handling the Legal, Accounting and Income Tax related issues of the Gratuity Benefits, Group Gratuity Trust Fund, and Employee Retention Schemes.

For more details, you may visit our blog: www.gratuityconsultant.blogspot.com
16th March 2019 From India, Delhi

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