Gratuity Fund has to be created by a deed and registered for management of funds and authority:
1. Opening of Gratuity Fund account with a Nationalized Bank.
2. Valuation done by Authorized Actuary : If you furnish a statement of Employees with their date of Birth, Date of Joining, their monthly Salary details and provide a column for the Actuary to fill in the gratuity accrued to them as per Gratuity act.
3. Now before the companies year end accounts, you have to provide the provision of Gratuity in the books of accounts, and before its due date that money should be Deposited into the Gratuity Fund account you maintain with a Nationalized Banks.
4. Now from next year, every year you will send the statement before the year end and get the valuation done. So the Total Gratuity Provision as per the new Statement you will see how much has been already created and you will now provide the difference and transfer the Funds to Gratuity Fund account. Say previous year valuation shows Rs.1,85,000/- and new valuation shows Rs.2,25,000/- then the difference of Rs.40,000/- will be current year Gratuity Provision you have to pay into the Current Account of Gratuity Fund Account with the Nationalized Bank. Unless this money is paid before the due date Income Tax will not allow this as a deduction. So Payment of money into the Gratuity Fund account with proof is mandatory.
NOW COME TO HOW TO MANAGE THE GRATUITY FUND ACCOUNT:
There is a statutory Provision for Investment of Gratuity Fund money in Authorized Secutiies. This you will get a copy from Actuary also. They will guide you.
1. Invest this amount in the manner of (%) prescribed by the act and rules of Gratuity Act.
They will say 40% in Central or State Govt. Secutiies.
Another in other forms of Security; 40% in special Account with the Nationalized Bank itself as per Gratuity Act.
Balance in Current Account say 20%
to make the 100%.
You have to check if the Listed Investments are Authorized under the
Gratuity and eligible Securies. Otherwise it is not an authorised investment under the Gratuity Act and Rules.
You have to manage the Funds:
If an employee leaves the organization:
You will calculate the amount as per Gratuity Payment Rules. This is nothing to do with the amount of Actuary Valuation done by the Actuary. Actuarial Valuation is only a provision under the act for payment funds from company account to Gratuity Fund Account. This cannot be reversed.
Now you will calculate the amount due to the Employee Rs...........
Now you will look for the amount in the Current Account Rs..............
If this amount is sufficient to pay to the Employee then you will give a check for the amount due to him, and take a Payment Voucher under XYZ COMPANY LTD.-GRATUITY FUND ACCOUNT
If suppose there is shortage of Funds then you first transfer some amount from company account to Gratuity Fund and then pay the due amount to the Employee.
At the year end, you will remove the employees name from list altogether. No need to show his name at all.
Thereby the new provision will be available from the Actuary:
At the year end:Then now look into your as of date: (what is actually available)
List of Investments: Rs...............
Add:Interest Received Rs................
Balance in the GF-Current Account Rs...............
Total of all the above.Rs................
New Provision as per list Rs..............
The difference will be now further transferred to Gratuity Fund Account.
LIKE COMPANIES ACCOUNTS ARE AUDITED, AUDIT OF GRATUITY FUND ACCOUNT IS ALSO TO BE DONE AND AUDIT CERTIFICATE IS TO BE OBTAINED.
GRATUITY FUND IS AN INDEPENDENT ENTITY AND
EVERY ACTION, INVESETMENT ETC. ARE TO MINITED IN THE MINUTES OF MEETING OF TRUSTEES OF FUND AND RESOLUTION IS TO BE PASSED.
AUTHORIZED SIGNATORIES FOR INVESTMENT, AND BANK ACCOUNTS ARE TO BE MADE WITH ANY TWO THE TRUSTEES WILL SIGN THE DOCUMENTS AND OPERATE THE BANK ACCOUNTS AND INVESTMENT FUNDS.
PAYMENT TO EMPLOYEE IS ALSO BE RESOLVED IN THE MEETING AND COPY KEPT IN RECORDS WITH PROPER SIGNATORY OF TRUSTEES.
The main issue is Gratuity Fund is seperate account and this funds cannot be misued.
Close monitoring of the Investments and getting the interest warrants and follow if not received.
Change in Trustees due to retirement, death and other reasons to be minuted and change of authorized Trustees to be circulated and recorded for all investments wherever necessary.
Regards
Ramakrishnan Sarma
From Saudi Arabia
101. Opening of Gratuity Fund account with a Nationalized Bank.
2. Valuation done by Authorized Actuary : If you furnish a statement of Employees with their date of Birth, Date of Joining, their monthly Salary details and provide a column for the Actuary to fill in the gratuity accrued to them as per Gratuity act.
3. Now before the companies year end accounts, you have to provide the provision of Gratuity in the books of accounts, and before its due date that money should be Deposited into the Gratuity Fund account you maintain with a Nationalized Banks.
4. Now from next year, every year you will send the statement before the year end and get the valuation done. So the Total Gratuity Provision as per the new Statement you will see how much has been already created and you will now provide the difference and transfer the Funds to Gratuity Fund account. Say previous year valuation shows Rs.1,85,000/- and new valuation shows Rs.2,25,000/- then the difference of Rs.40,000/- will be current year Gratuity Provision you have to pay into the Current Account of Gratuity Fund Account with the Nationalized Bank. Unless this money is paid before the due date Income Tax will not allow this as a deduction. So Payment of money into the Gratuity Fund account with proof is mandatory.
NOW COME TO HOW TO MANAGE THE GRATUITY FUND ACCOUNT:
There is a statutory Provision for Investment of Gratuity Fund money in Authorized Secutiies. This you will get a copy from Actuary also. They will guide you.
1. Invest this amount in the manner of (%) prescribed by the act and rules of Gratuity Act.
They will say 40% in Central or State Govt. Secutiies.
Another in other forms of Security; 40% in special Account with the Nationalized Bank itself as per Gratuity Act.
Balance in Current Account say 20%
to make the 100%.
You have to check if the Listed Investments are Authorized under the
Gratuity and eligible Securies. Otherwise it is not an authorised investment under the Gratuity Act and Rules.
You have to manage the Funds:
If an employee leaves the organization:
You will calculate the amount as per Gratuity Payment Rules. This is nothing to do with the amount of Actuary Valuation done by the Actuary. Actuarial Valuation is only a provision under the act for payment funds from company account to Gratuity Fund Account. This cannot be reversed.
Now you will calculate the amount due to the Employee Rs...........
Now you will look for the amount in the Current Account Rs..............
If this amount is sufficient to pay to the Employee then you will give a check for the amount due to him, and take a Payment Voucher under XYZ COMPANY LTD.-GRATUITY FUND ACCOUNT
If suppose there is shortage of Funds then you first transfer some amount from company account to Gratuity Fund and then pay the due amount to the Employee.
At the year end, you will remove the employees name from list altogether. No need to show his name at all.
Thereby the new provision will be available from the Actuary:
At the year end:Then now look into your as of date: (what is actually available)
List of Investments: Rs...............
Add:Interest Received Rs................
Balance in the GF-Current Account Rs...............
Total of all the above.Rs................
New Provision as per list Rs..............
The difference will be now further transferred to Gratuity Fund Account.
LIKE COMPANIES ACCOUNTS ARE AUDITED, AUDIT OF GRATUITY FUND ACCOUNT IS ALSO TO BE DONE AND AUDIT CERTIFICATE IS TO BE OBTAINED.
GRATUITY FUND IS AN INDEPENDENT ENTITY AND
EVERY ACTION, INVESETMENT ETC. ARE TO MINITED IN THE MINUTES OF MEETING OF TRUSTEES OF FUND AND RESOLUTION IS TO BE PASSED.
AUTHORIZED SIGNATORIES FOR INVESTMENT, AND BANK ACCOUNTS ARE TO BE MADE WITH ANY TWO THE TRUSTEES WILL SIGN THE DOCUMENTS AND OPERATE THE BANK ACCOUNTS AND INVESTMENT FUNDS.
PAYMENT TO EMPLOYEE IS ALSO BE RESOLVED IN THE MEETING AND COPY KEPT IN RECORDS WITH PROPER SIGNATORY OF TRUSTEES.
The main issue is Gratuity Fund is seperate account and this funds cannot be misued.
Close monitoring of the Investments and getting the interest warrants and follow if not received.
Change in Trustees due to retirement, death and other reasons to be minuted and change of authorized Trustees to be circulated and recorded for all investments wherever necessary.
Regards
Ramakrishnan Sarma
From Saudi Arabia
We are providing actuarial consultancy in the area of employee benefits wherein compliance of Accounting Standards of the Institutes of Chartered Accountants is applied. Most important institute, in the Indian context, is The Institute of Chartered Accountants of India. The relevant accounting standard applicable to accounting for employee benefits issued by The Institute of Chartered Accountant of India is Accounting Standard-15 (Revised 2005) and some of the important employee benefits involving actuarial treatment are :-
Gratuity
Leave Encashment
Pension
Post Retirement Medical Benefits
Since annual financial statements such as Balance Sheet and Profit/ Loss Statement of your clients are at hand for the close of the financial year as on 31.03.2013, the services we deal in will be needed by you and we will be happy to provide our services if needed. For further details we request you to visit our website at <link no longer exists - removed>
Tikaram Chaudhary
9211637063
From India, Delhi
Gratuity
Leave Encashment
Pension
Post Retirement Medical Benefits
Since annual financial statements such as Balance Sheet and Profit/ Loss Statement of your clients are at hand for the close of the financial year as on 31.03.2013, the services we deal in will be needed by you and we will be happy to provide our services if needed. For further details we request you to visit our website at <link no longer exists - removed>
Tikaram Chaudhary
9211637063
From India, Delhi
Is it still not mandatory (in Maharashtra) for every factory to have a gratuity insurance funded with LIC or some other approved insurer ?? A S Bhat
From India, Pune
From India, Pune
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc