Group Gratuity Scheme (From LIC of India)
This is a Statutory benefit to the employees for their services to the Employer and is governed by the Gratuity Act, 1972 (Amended 2010). This Act stipulates payment of the Gratuity as a statutory benefit to such employees who have to pay Gratuity benefits better than the statutory requirements may as well be offered.
As per revised accounting standards, the Gratuity liability is to be estimated by actuarial valuation every year and to be provided in the books if account of the Company. Gratuity liability increases with increase in salary and services of the employee every year. Thus a prudent employer should create a Gratuity Fund instead of making provisions in books of account. Developing such fund with LIC should help the company in creating an asset to meet the Gratuity liabilities of the company in most tax efficient manner.
Features and benefits of the scheme
Tax Benefits :
Documents :
As per revised accounting standards, the Gratuity liability is to be estimated by actuarial valuation every year and to be provided in the books if account of the Company. Gratuity liability increases with increase in salary and services of the employee every year. Thus a prudent employer should create a Gratuity Fund instead of making provisions in books of account. Developing such fund with LIC should help the company in creating an asset to meet the Gratuity liabilities of the company in most tax efficient manner.
Features and benefits of the scheme
- Employees' Gratuity trust needs to be set up as per provisions of Income Tax Act - LIC provide necessary assistance and guidance in this process.
- LIC maintains the fund under the name of the trust.
- Investment of funds is taken care by LIC and interest is declared as per the performance of the total fund and credited ti the individual trust fund.
- At the time of exit of an employee, trustees send discharge and advise LIC to make payment of Gratuity as per scheme to the trust.
- The insurance scheme of LIC provides future service gratuity in case of unfortunate death of the member at a very reasonable cost.
Tax Benefits :
- Contribution to LIC are treated as business expenses to the company.
- Interest earnings by the fund are tax free.
Documents :
- Age of Employee
- Date of Birth of employee
- Date of Joining.
- Salary + DA.
- Age of retirement.
