Applicability of Section 4A of Payment of Gratuity Act 1972 in Gujarat

Is Section 4(A) of Payments of Gratuity Act 1972 that is COMPLUSORY INSURANCE is applicable in state of Gujarat ? Kindly throw the light.

Many states are yet to notify this section of Payment of Gratuity Act. You may contact the Labour Officer for details.

Dear Madhu TK Sir,

If the company is deducting the Gratuity Amount from the CTC of the employees, then does company needs to invest the same in Gratuity Fund or Gratuity Insurance. Or the company can just transfer the deducted Gratuity amount to the Provision for Gratuity.

What will be Accounting Treatment for the amount deducted ?.

Thank You

What is the relevance of "deducting" gratuity amount from the CTC? The CTC itself is wrong. You should take the salary out of it and see if there is any deduction by way of gratuity. There will not be any deduction towards gratuity.

Now coming to the point of discussion, every employer is expected to create/ provide for a gratuity fund as per the Accounting Standards. Your Accountant will not finalise your Profit and Loss account and Balance sheet without providing for gratuity liability and that provision will be made after an actuarial valuation. This is done by taking in to account the age of employees, their retirement date, probable number of employees who are expected to leave the company in the next year etc. By making this provision, the company will be able to pay gratuity without depleting their working capital.

If your state has not made it mandatory to invest the said fund with LIC, then you can keep it as such under a separate trust fund.

As per my information, Section 4A has only been notified in the State of Andhra Pradesh and remains unnotified for rest of India till the year-2019.
The CTC doesn't means the amount receivable by the employee, rather an indicative cost of each employee for the employer.

Most of the companies mention the gratuity amount in the employee CTC. CTC is just cost to company including all remuneration/payment to employee ...we can't say this as a deduction of Gratuity amount from employee salary.