Season of Audit is about to start from 01.04.2025, and I hope my write-up about the mandatory accounting and legal compliances related to gratuity benefits may help CA/CS/Auditors in performing the audits of Indian and multinational companies:
Accounting Compliance as per provisions of the Companies Act, 2013
Accounting compliances are applicable to all companies operating in 36 states/UTs with a total number of employees of 10 or more. As per the provisions of Section 129 of the Companies Act 2013, all Indian and multinational companies operating in India need to prepare financial statements such as balance sheets and profit/loss accounts at the closure of each financial year in compliance with accounting standards as stipulated in Section 133 of the Companies Act 2013. Accounting and disclosure requirements for employee benefits plans (i.e., gratuity plan) are laid down in the following two accounting standards as issued by The Institute of Chartered Accountants of India (ICAI):
- AS-15 (Revised 2005)
- IndAS-19
Actuarial valuations for compliance with the above accounting standards are required for gratuity and other employee benefit plans. The actuarial valuations are required by Indian companies in various events such as making initial and annual contributions into the gratuity trust account, making provisions of gratuity liability in the balance sheet as per accounting standards, and more.
Legal Compliances as per provisions of the Payment of Gratuity Act, 1972
All Indian and multinational establishments with an employee strength of 10 or more are required to comply with the provisions of the Payment of Gratuity Act, 1972, and the Payment of Gratuity Rules. Companies in certain states are required to comply with compulsory gratuity insurance rules and establish approved gratuity funds. Companies are also required to maintain records and forms as specified in the rules.
Social Security Code 2020 (Draft) Compliances to be implemented in FY 2025-26
The drafts of the Social Security Code (2020) to be implemented in FY 2025-26 have provisions related to gratuity benefits. The implementation will be in a phased manner based on the number of employees in companies. The code includes provisions for registration, cancellation of establishment, and compulsory gratuity insurance.
For more detailed information and specific compliance requirements, please refer to the relevant labor laws and policies.
From India, New Delhi
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Accounting Compliance as per provisions of the Companies Act, 2013
Accounting compliances are applicable to all companies operating in 36 states/UTs with a total number of employees of 10 or more. As per the provisions of Section 129 of the Companies Act 2013, all Indian and multinational companies operating in India need to prepare financial statements such as balance sheets and profit/loss accounts at the closure of each financial year in compliance with accounting standards as stipulated in Section 133 of the Companies Act 2013. Accounting and disclosure requirements for employee benefits plans (i.e., gratuity plan) are laid down in the following two accounting standards as issued by The Institute of Chartered Accountants of India (ICAI):
- AS-15 (Revised 2005)
- IndAS-19
Actuarial valuations for compliance with the above accounting standards are required for gratuity and other employee benefit plans. The actuarial valuations are required by Indian companies in various events such as making initial and annual contributions into the gratuity trust account, making provisions of gratuity liability in the balance sheet as per accounting standards, and more.
Legal Compliances as per provisions of the Payment of Gratuity Act, 1972
All Indian and multinational establishments with an employee strength of 10 or more are required to comply with the provisions of the Payment of Gratuity Act, 1972, and the Payment of Gratuity Rules. Companies in certain states are required to comply with compulsory gratuity insurance rules and establish approved gratuity funds. Companies are also required to maintain records and forms as specified in the rules.
Social Security Code 2020 (Draft) Compliances to be implemented in FY 2025-26
The drafts of the Social Security Code (2020) to be implemented in FY 2025-26 have provisions related to gratuity benefits. The implementation will be in a phased manner based on the number of employees in companies. The code includes provisions for registration, cancellation of establishment, and compulsory gratuity insurance.
For more detailed information and specific compliance requirements, please refer to the relevant labor laws and policies.
From India, New Delhi
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LEGAL COMPLIANCES.doc
Legal Compliance Plan.xls