Hi Professionals, How to arrive at qunatum of gratuity amount to make a provision in books of each financial year? Thanks & Regards Sreeni
From India, Bangalore
From India, Bangalore
Dear
In accordance with the latest provisions of the Income Tax Act, 1961, now it is mandatory for all Corporates to make provision of gratuity liability year by year in their books of account. So you have to calculate gratuity for all the employees whose have completed five year service with the formula as given below and show it as deferred expenditure.
Basic Salary of an Individual x 15/26 x Servicing years = Gratuity Amount of that individual employee.
Regards
R B Yadav
Advocate
From India, Mumbai
114In accordance with the latest provisions of the Income Tax Act, 1961, now it is mandatory for all Corporates to make provision of gratuity liability year by year in their books of account. So you have to calculate gratuity for all the employees whose have completed five year service with the formula as given below and show it as deferred expenditure.
Basic Salary of an Individual x 15/26 x Servicing years = Gratuity Amount of that individual employee.
Regards
R B Yadav
Advocate
From India, Mumbai
Dear Mr. Yadav,
Can you please help in explaining further on the same. As per your quote it is only for the employees who have completed their 5years need to show provision in books (or) it is mandatory to show provision for all employees from their date of joining.
Regards,
From India, Hyderabad
Can you please help in explaining further on the same. As per your quote it is only for the employees who have completed their 5years need to show provision in books (or) it is mandatory to show provision for all employees from their date of joining.
Regards,
From India, Hyderabad
Just to update on the above, the calculations are as per Income tax act, but for Accounting the provision in the books, you need to follow the guidelines prescribed under the Accounting Standard AS 15 (Revised).
As per AS 15 Revised, the Provision as of March 31, (Year end) needs to be accounted based on an Actuarial valuation done by Actuaries.
You are required to provide basic information of the Salary data required for computing the Actuarial valuation.
Based on the Actuarial valuation report, you need to Account for Provision in the Books of accounts.
From India, Faridabad
As per AS 15 Revised, the Provision as of March 31, (Year end) needs to be accounted based on an Actuarial valuation done by Actuaries.
You are required to provide basic information of the Salary data required for computing the Actuarial valuation.
Based on the Actuarial valuation report, you need to Account for Provision in the Books of accounts.
From India, Faridabad
As per Section 4-A: of Payment of gratuity Act every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, obtain an 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. That being so the liability of payment of gratuity naturally shifts to the shoulders of the Insurance organisation. Therefore You need not provide for provision for gratuity. In case the insurance does not cover the gratuity amount then only you have to provide for the difference.
From India, New Delhi
From India, New Delhi
Financial statements also need figures attributable to Employee Benefits. Accounting and Disclosure of Employee Benefits are prescribed in Accounting Standards. Most relevant Accounting Standards are:-
Accounting Standards -15 (Revised 2005)
Ind AS-19
IAS-19 (Revised 2011)
Accounting under USGAAP
Accounting for Employee Benefits, which are in the nature of Defined Benefits are generally linked with Terminal Salary of employees, requires Actuarial Services. Very common types of Employee Benefits which are in the nature of Defined Benefits in the Indian Context are :-
Gratuity Benefits
Leave Encashment Benefits
Pension Benefits
Post Retirement Medical Benefits
Long Service Award Incentives
Etc. Etc………………………..
As already mentioned here-to-fore Actuarial Inputs are required if accounting for above types of benefits (Defined Benefits) is to be made in compliance of Accounting Standard/Standards.
We have expertise and rich experience in providing actuarial services for the above purpose. Our experience in this field extends over a period of around 15 Years. Our clientele is amongst Indian Companies both in the Public & Private Sectors, Multinationals (MNC’S), Manufacturing Companies, Service Companies, BPO’S, KPO’S, Software/Technology Companies ,Universities, IIT’s , Schools, Banks, Hospitals, Electricity Companies, etc. etc.
For more details visit our website at www dot mlsodhiactuary dot com
In case you require our services please contact us at the following Numbers:-
Mr. Tikaram Chauhdary - 9211637063 (Mob)
From India, Delhi
Accounting Standards -15 (Revised 2005)
Ind AS-19
IAS-19 (Revised 2011)
Accounting under USGAAP
Accounting for Employee Benefits, which are in the nature of Defined Benefits are generally linked with Terminal Salary of employees, requires Actuarial Services. Very common types of Employee Benefits which are in the nature of Defined Benefits in the Indian Context are :-
Gratuity Benefits
Leave Encashment Benefits
Pension Benefits
Post Retirement Medical Benefits
Long Service Award Incentives
Etc. Etc………………………..
As already mentioned here-to-fore Actuarial Inputs are required if accounting for above types of benefits (Defined Benefits) is to be made in compliance of Accounting Standard/Standards.
We have expertise and rich experience in providing actuarial services for the above purpose. Our experience in this field extends over a period of around 15 Years. Our clientele is amongst Indian Companies both in the Public & Private Sectors, Multinationals (MNC’S), Manufacturing Companies, Service Companies, BPO’S, KPO’S, Software/Technology Companies ,Universities, IIT’s , Schools, Banks, Hospitals, Electricity Companies, etc. etc.
For more details visit our website at www dot mlsodhiactuary dot com
In case you require our services please contact us at the following Numbers:-
Mr. Tikaram Chauhdary - 9211637063 (Mob)
From India, Delhi
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