Dear Sh.Harikrishnan,
Gratuity is part of my CTC and the amount is held by the employer. When I asked the question during my joining on the status of the gratuity amount if I resign without completing 5 yrs service. I was told by them that the money held will be deposited with the statutory bodies. Is there any such provision with Labour office to accept such money held against gratuity of employees?
Pon
From India, Lucknow
604Gratuity is part of my CTC and the amount is held by the employer. When I asked the question during my joining on the status of the gratuity amount if I resign without completing 5 yrs service. I was told by them that the money held will be deposited with the statutory bodies. Is there any such provision with Labour office to accept such money held against gratuity of employees?
Pon
From India, Lucknow
Dear Mr. Ponraj
Eventhough the CTC is calculated with all the benefits, some allowances are and Superannuation Funds will be released only as per the rules. For getting the Gratuity one must serve atleast for 5 years. If one goes out before fulfilling the terms of engagement then obviously one will have to lose the benefits. Once you are not eligible to get the Gratuity you cannot get it.
From India, Kumbakonam
Eventhough the CTC is calculated with all the benefits, some allowances are and Superannuation Funds will be released only as per the rules. For getting the Gratuity one must serve atleast for 5 years. If one goes out before fulfilling the terms of engagement then obviously one will have to lose the benefits. Once you are not eligible to get the Gratuity you cannot get it.
From India, Kumbakonam
Bhaskar, My question is different. I am not asking for eligibility. I just asked what my employer told me is right or not? Read my post once again. Pon
From India, Lucknow
From India, Lucknow
It is not required to deposit with anyone in case of resignation cases. It is required only in case of accidental death while on duty and natural death those who worked more than 1 year service.
From India, Kumbakonam
From India, Kumbakonam
Dear Mr.Pon
The following is your query through your last but one post:"Gratuity is part of my CTC and the amount is held by the employer. When I asked the question during my joining on the status of the gratuity amount if I resign without completing 5 yrs service. I was told by them that the money held will be deposited with the statutory bodies. Is there any such provision with Labour office to accept such money held against gratuity of employees?"
The following is my reply:
1.(a)The Payment of Gratuity Act does not require the employer to deposit with the statutory bodies/authorities the gratuity amount in respect of those who leave the employers service/resign without completing the five year of continuous service.
1.(b) The Payment of Gratuity Act requires the employer to deposit with the statutory bodies/authorities the gratuity amount only if there is any dispute regarding the person to whom the gratuity amount is payable or the quantum of gratuity payable. This would arise only in the case of employees who leave the services of the company or resign or even die while in service, after they complete five years of continuous service. Once this deposit is made and the receipt therefor obtained, then the employer's liability, in so far as it amounts the quantum of gratuity deposited, is discharged. In other words you would see in the Payment of Gratuity Act that if the employer makes a delayed payment of gratuity to his employee he is liable to pay interest on the gratuity amount to the employee. This liability to pay interest is extinguished once the deposit is made.
2.The CTC(Cost to the Company) is so far as my knoweldge goes ( I am open to correction on this point) is made to assess the liability of the company in respect of an employee and mostly used for costing purposes. CTC has no relevance to the liability under the Payment of Gratuity.
3.Some of the employers take a group insuracne for gratuity liability(I presume that I am using the correct phrase here). The Company which issues this policy assesses the liability of the employer to pay Gratuity over a specified period. This assessment is made on the provisions of the Payment of Gratuity Act regarding the quantum and eligibility to get the gratuity and also in certain cases on the Rules/Regulations in force in the establishment for the payment of gratuity. You should note that even according to the Payment of Gratuity Act, if any employee is entitled to better terms of gratuity than what is provided for under the PG Act, those terms will prevail over the PG Act. The age profile of the employees of the establishment who are entitled to get gratuity is also taken into account. Based on this the Insurance Company covering the liability of the employer to pay gratuity will collect an amount( I think it is called premium). The amount so collected by the Insurance company will be invested in securities/shares. When the payment of gratuity falls due, the Insurance company will make payment to the extent to which it has covered subject of course to the wages of the employee and his length of service. In other words, if according to the terms of the policy the maximum amount payable by the insurance company is say Rs.9 lakhs, and if the employee is entitled to Rs.10 lakhs then the insurance company will pay only pay Rs.9 lakhs and the employer has to pay the balance Rs.1 lakh.I have personally come across instances where the employers refused to pay more than what has been covered by the insurance policy. Ultimately they had to pay the balance along with interest. Such kind of issues have gone as far as my knowledge goes upto High Courts and the High Courts have held that the liability of the insurer extends only upto the quantum insured by them and that the balance has to be paid by the employer. I am not readily having either the cause title of the case or the citation.
4.In your case the possibility is that the amount paid to the Insurance company is being put forth as a deposit with the statutory authorities.
5.In cases where the Company has not taken out an insurance policy as stated above, what is done(again I am open to correction on this point) an account head called the "Gratuity Fund" is created in the books of account of the compnay and the gratuity liability in respect of all the employees as on a particular date is calculated and the amount is shown as having been credited to the "Gratuity Fund". The "Gratuity Fund" may be a virtual fund and the credit in this Fund will be shown in the books of account of the company and also reflected in the Profit and Loss Account and Balance Sheet of the Company. In case an employee leaves the company without completing five years of service, then a calculation of the amount credited to the "Gratuity Fund" in respect of that employee will be calculated and debited from the Gratuity Fund and appropriate accounting entries made for this transaction.
I think I have clarfied the issues raised by you
With regards
From India, Madras
The following is your query through your last but one post:"Gratuity is part of my CTC and the amount is held by the employer. When I asked the question during my joining on the status of the gratuity amount if I resign without completing 5 yrs service. I was told by them that the money held will be deposited with the statutory bodies. Is there any such provision with Labour office to accept such money held against gratuity of employees?"
The following is my reply:
1.(a)The Payment of Gratuity Act does not require the employer to deposit with the statutory bodies/authorities the gratuity amount in respect of those who leave the employers service/resign without completing the five year of continuous service.
1.(b) The Payment of Gratuity Act requires the employer to deposit with the statutory bodies/authorities the gratuity amount only if there is any dispute regarding the person to whom the gratuity amount is payable or the quantum of gratuity payable. This would arise only in the case of employees who leave the services of the company or resign or even die while in service, after they complete five years of continuous service. Once this deposit is made and the receipt therefor obtained, then the employer's liability, in so far as it amounts the quantum of gratuity deposited, is discharged. In other words you would see in the Payment of Gratuity Act that if the employer makes a delayed payment of gratuity to his employee he is liable to pay interest on the gratuity amount to the employee. This liability to pay interest is extinguished once the deposit is made.
2.The CTC(Cost to the Company) is so far as my knoweldge goes ( I am open to correction on this point) is made to assess the liability of the company in respect of an employee and mostly used for costing purposes. CTC has no relevance to the liability under the Payment of Gratuity.
3.Some of the employers take a group insuracne for gratuity liability(I presume that I am using the correct phrase here). The Company which issues this policy assesses the liability of the employer to pay Gratuity over a specified period. This assessment is made on the provisions of the Payment of Gratuity Act regarding the quantum and eligibility to get the gratuity and also in certain cases on the Rules/Regulations in force in the establishment for the payment of gratuity. You should note that even according to the Payment of Gratuity Act, if any employee is entitled to better terms of gratuity than what is provided for under the PG Act, those terms will prevail over the PG Act. The age profile of the employees of the establishment who are entitled to get gratuity is also taken into account. Based on this the Insurance Company covering the liability of the employer to pay gratuity will collect an amount( I think it is called premium). The amount so collected by the Insurance company will be invested in securities/shares. When the payment of gratuity falls due, the Insurance company will make payment to the extent to which it has covered subject of course to the wages of the employee and his length of service. In other words, if according to the terms of the policy the maximum amount payable by the insurance company is say Rs.9 lakhs, and if the employee is entitled to Rs.10 lakhs then the insurance company will pay only pay Rs.9 lakhs and the employer has to pay the balance Rs.1 lakh.I have personally come across instances where the employers refused to pay more than what has been covered by the insurance policy. Ultimately they had to pay the balance along with interest. Such kind of issues have gone as far as my knowledge goes upto High Courts and the High Courts have held that the liability of the insurer extends only upto the quantum insured by them and that the balance has to be paid by the employer. I am not readily having either the cause title of the case or the citation.
4.In your case the possibility is that the amount paid to the Insurance company is being put forth as a deposit with the statutory authorities.
5.In cases where the Company has not taken out an insurance policy as stated above, what is done(again I am open to correction on this point) an account head called the "Gratuity Fund" is created in the books of account of the compnay and the gratuity liability in respect of all the employees as on a particular date is calculated and the amount is shown as having been credited to the "Gratuity Fund". The "Gratuity Fund" may be a virtual fund and the credit in this Fund will be shown in the books of account of the company and also reflected in the Profit and Loss Account and Balance Sheet of the Company. In case an employee leaves the company without completing five years of service, then a calculation of the amount credited to the "Gratuity Fund" in respect of that employee will be calculated and debited from the Gratuity Fund and appropriate accounting entries made for this transaction.
I think I have clarfied the issues raised by you
With regards
From India, Madras
Hello
I recently got retrenched and paid a severance package of 3 months (3 year of service completed).
Problem is company has deducted tax on it. They haven't given Form-16 yet.
How can i claim the tax benefit under Section 25F(b) (15 days for every year ). ?
Does the Form 16 must say the word 'Retrenchment Benefit' ?
Do the company who is laying off people need to take special permission from somewhere (may be labor department or anywhere ) before
they can add the word 'retrenchment' in Form 16 ?
Under the tax benefit, 15 day salary means monthly salary or only Basic + DA ?
Kindly help
I recently got retrenched and paid a severance package of 3 months (3 year of service completed).
Problem is company has deducted tax on it. They haven't given Form-16 yet.
How can i claim the tax benefit under Section 25F(b) (15 days for every year ). ?
Does the Form 16 must say the word 'Retrenchment Benefit' ?
Do the company who is laying off people need to take special permission from somewhere (may be labor department or anywhere ) before
they can add the word 'retrenchment' in Form 16 ?
Under the tax benefit, 15 day salary means monthly salary or only Basic + DA ?
Kindly help
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IMPACT OF RETRENCHMENT ON RECESSION.ppt
RETRENCHMENT ANNEXURE.doc