Gratuity Policy Dilemma: Should We Opt for Insurance or Annual Provisions?

Dear Friends, Please advise me on the gratuity policy. As all of you know, we have two options:

1. Buy a group gratuity policy from insurance service providers.
2. Make provision for gratuity claims on a yearly basis in the company's books of account.

Which option is better? Our headcount is 30 and soon it will reach 50 employees.

Thanks,
Vaishali

It is always better to take a policy. It is advantageous in terms of tax saving for the organization, and it is safe for employees as well.

Regards,
Vinayak V Bhat

Amendment to the Act: Compulsory Insurance

The Act has been amended. See the provision below:

Section: 4A Compulsory Insurance

(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer.

However, this has not been notified yet, and we do not know when this will be notified. Definitely, taking an insurance policy will become a statutory requirement soon. Hence, it is recommended to take a policy in the initial stage itself.

Regards,
Sivasankaran