Is the company obligated to procure insurance under the Karnataka Compulsory Gratuity Insurance Rules of 2024 if only four employees have completed their five years of service? Considering insurance companies might not provide coverage for such a small number of employees, posing challenges for MSMEs.
From India, Bengaluru
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From India, Bengaluru
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If you have ten employees, your establishment will come under the Payment of Gratuity Act and the rules made thereon. It is immaterial how many of your employees have completed the prescribed five years for entitlement of gratuity. Please understand that gratuity is payable to the dependents of a deceased employee even if the employee has not worked for five years. The same applies to cessation of employment due to permanent total disablement also.
Therefore, if you have 10 or more employees, the Act will be applicable to you, and since the Karnataka government has notified section 4A (compulsory insurance of gratuity fund), you have to purchase it.
From India, Kannur
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4766Therefore, if you have 10 or more employees, the Act will be applicable to you, and since the Karnataka government has notified section 4A (compulsory insurance of gratuity fund), you have to purchase it.
From India, Kannur
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Hi,
In a significant move to safeguard employee rights and ensure financial security, the Karnataka Government has introduced the Karnataka Compulsory Gratuity Insurance Rules, 2024. Under the new rules, companies can obtain gratuity insurance from the Life Insurance Corporation (LIC) or any other insurance company incorporated under applicable laws. Existing companies must obtain insurance within sixty days (by 10 March 2024), while new employers should secure insurance within thirty days from the date the rules become applicable to their establishment.
(Reference: https://www.plumhq.com/blog/karnataka-gratuity-insurance-rules-2024-explained#:~:text=Obtaining%20Insurance&te xt=Existing%20companies%20must%20obtain%20insuranc e,become%20applicable%20to%20their%20establishment .)
Section 4A of the Payment of Gratuity Act, 1972 (Gratuity Act) imposes an obligation on employers of establishments with ten or more employees to procure insurance to cover their liability of paying gratuity to exiting employees. However, the requirement of procuring such gratuity insurance arises only if the appropriate government (i.e., the state government) makes rules to give effect to the provisions of this section, by way of a notification. Few states in India such as Andhra Pradesh and Telangana have notified compulsory gratuity insurance rules. The government of Karnataka has also joined the said states by notifying the Karnataka Compulsory Gratuity Insurance Rules, 2024 (Gratuity Rules) through a notification dated 10 January 2024, which make it mandatory for employers to procure an insurance policy to cover their gratuity liability.
If your company comes under the purview of the Gratuity Act, then compulsory gratuity insurance is required regardless of the number of employees who have completed 5 years. You need to cover all employees, not just those who have completed 5 years. A monthly addition/deletion report must be submitted to the insurance company. Coverage will start from day one of the employee joining.
From India, Madras
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In a significant move to safeguard employee rights and ensure financial security, the Karnataka Government has introduced the Karnataka Compulsory Gratuity Insurance Rules, 2024. Under the new rules, companies can obtain gratuity insurance from the Life Insurance Corporation (LIC) or any other insurance company incorporated under applicable laws. Existing companies must obtain insurance within sixty days (by 10 March 2024), while new employers should secure insurance within thirty days from the date the rules become applicable to their establishment.
(Reference: https://www.plumhq.com/blog/karnataka-gratuity-insurance-rules-2024-explained#:~:text=Obtaining%20Insurance&te xt=Existing%20companies%20must%20obtain%20insuranc e,become%20applicable%20to%20their%20establishment .)
Section 4A of the Payment of Gratuity Act, 1972 (Gratuity Act) imposes an obligation on employers of establishments with ten or more employees to procure insurance to cover their liability of paying gratuity to exiting employees. However, the requirement of procuring such gratuity insurance arises only if the appropriate government (i.e., the state government) makes rules to give effect to the provisions of this section, by way of a notification. Few states in India such as Andhra Pradesh and Telangana have notified compulsory gratuity insurance rules. The government of Karnataka has also joined the said states by notifying the Karnataka Compulsory Gratuity Insurance Rules, 2024 (Gratuity Rules) through a notification dated 10 January 2024, which make it mandatory for employers to procure an insurance policy to cover their gratuity liability.
If your company comes under the purview of the Gratuity Act, then compulsory gratuity insurance is required regardless of the number of employees who have completed 5 years. You need to cover all employees, not just those who have completed 5 years. A monthly addition/deletion report must be submitted to the insurance company. Coverage will start from day one of the employee joining.
From India, Madras
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Gratuity Trust Fund Consultant is an MSME registered with the Ministry of Micro, Small and Medium Enterprise with Registration Number UDYAM-DL-11-0013795. Our Consulting Firm is headed by Mr. Tikaram Chaudhary, who has almost 15 years of experience and specialization in providing consultation for Actuarial, Legal, Insurance, and Investment matters related to Old and New Gratuity Trusts as per various provisions of Accounting Standards (i.e., IndAS 19, AS 15 (Revised 2005), IAS 19 (Revised 2011) & USGAAP ASC 715), Indian Trust Act 1882, The Payment of Gratuity Act, 1972, The Payment of Gratuity Rules, 1973, Income Tax Act 1961, Income Tax Rules, 1962, Fourth Schedule of Income Tax Act, 1961 & relevant Acts/Rules.
Generally, Gratuity Trusts are formed by the most reputed Indian & multinational companies as per provisions of in terms of Part C of Fourth Schedule of Income Tax Act, 1961 in irrevocable System for compliance of Section 4A of the Payment of Gratuity Act, 1972 and getting the Tax Benefits available under Section 36 (i) (v) and 10 (25) (iv) of Income Tax Act, 1961.
Gratuity Trust Fund Consultant is a Leading Corporate Consulting Firm served more than 1000 Most Reputed Indian & multinational companies with Actuarial Valuation, Legal, Gratuity Insurance, and Gratuity Trust Investment Solutions for Employee Benefit (i.e., Gratuity, Leave Encashment, Pension, PRMB etc.).
GTFC is actively involved in providing End to End Consultation for effectively implementing Accounting, Actuarial, and Legal compliances of the Payment of Gratuity Act, 1972, The Payment of Gratuity Rules, 1973 & Accounting Standards (AS 15 Revised 2005, IndAS 19 & IAS 19-IFRS) applicable on Indian & multinational establishments. The details of Actuarial, Legal, Insurance, and Investment Compliances related to Gratuity Benefits and other Defined Benefits are as under: -
1. Gratuity Trust Solutions
The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC’s, Schools, Hospitals, NGO’s, Trust’s and other business entities) having more than 10 employees in the past 12 months before the Balance Sheet date. For the purpose of effectively implementing the Payment of Gratuity Act, 1972, the following compliances and penal provisions (i.e. Refer Section 9 in the Payment of Gratuity Act, 1972) are imposed on Establishments by the Competent Authority (i.e., Deputy Labor Commissioner) regulating the Provisions of the Payment of Gratuity Act, 1972: -
a. Registration of Establishment (i.e., Submission of Form A – Notice of Opening in DLC Office)
b. Maintenance of Records Nominees of Employees in Form F (i.e., For the payment of Death Gratuity)
c. Maintenance of Records other Forms as prescribed in Rule 3 to 6 of the Payment of Gratuity Rules
d. Compulsory Gratuity Insurance – Compulsorily applicable to Indian, US, UK, UAE, Japanese, European, Asian Companies registered with DLC Offices in the jurisdiction of Karnataka, Telangana, and Andhra Pradesh.
e. Establishment of the CIT Approved Gratuity Trust for Compulsory Gratuity Insurance.
f. Investment of Gratuity Trust Money into Compulsory Gratuity Insurance through Group Gratuity Schemes of Insurance companies such as:
a. SBI Life Insurance Company Limited
b. Life Insurance Corporation of India
c. Pramerica Life Insurance Limited
d. Bajaj Allianz Life Insurance Co. Ltd
e. ICICI Prudential Life Insurance Company Limited
g. The Process of Establishment of Gratuity Trust for Compulsory Gratuity Insurance requires Establishment to Involve in the following process: -
I. Vetting of Board Resolution for Gratuity Trust Formation,
II. Vetting of Gratuity Trust Deed,
III. Vetting of Gratuity Trust Rules &
IV. Vetting of Application under Section 9 for Approval from CIT in terms of Rule 109 of Income Tax Rules, 1962
Furthermore, if there is any amendment happened in changes indicated below then Vetting of Deed of Variations and Applications to CIT are required by Trustees/Companies for taking Approvals from CIT for retention of CIT Approval for Gratuity Trust in terms of Part C of Schedule IV of Income Tax Act, 1961 for getting the tax benefits under Section under Section 36 (i) (v) and 10 (25) (iv) of Income Tax Act, 1961 even after the following changes: -
a) Change in Name of Trust,
b) Change in Address of Trust,
c) Change in Trustees,
d) Change in Investment Pattern of Gratuity Funds from 1 Insurer to another
e) Change in Benefit Formulae for Gratuity Benefits
f) Change in Retirement Age of Employees
g) Change in Object of Trust
h) Change in Trust Rules
i) For winding up of Trust due to winding up of the Company
j) For Transfer of Gratuity Fund from one Trust to another in Event of Merger or De-merger
h. All matter related to Old Gratuity Trusts and Group Gratuity Schemes such as Vetting work of Deed of Variations, Application, Board Resolution, and Application to Bank, LIC & CIT in various events such as Merger, De-merger, Acquisitions, etc.
2. Actuarial Valuation Solutions
As per provisions of Section 129 of the Companies Act 2013, Indian and Multinational Companies Operating India needs to prepare the Financial Statement such as Balance Sheet & Profit/Loss Accounts at the closure of each financial year in compliance with Accounting Standards as stipulated in Section 133 of the Companies Act 2013, so that they can give a true and fair view of the state of affairs of the company. Accounting and Disclosure requirements for Employee Benefits Plans are laid down in the following 2 Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI): -
A. Indian Accounting Standard for Accounting of Employees Benefits
INDIAN GAAP- AS-15 (Revised 2005)
IndAS-19
B. Global Accounting Standard for Accounting of Employees Benefits
International Accounting Standard (IAS-19 Revised 2011) of the IFRS
US GAAP – (FAS-87, 88 & 158) etc.
Generally, Actuarial Valuations for compliance with the above Accounting Standards are required for the following Employee Benefit Plans under: -
a. Actuarial Valuation for Gratuity Plans,
b. Actuarial Valuation for End of Service Benefit Plan,
c. Actuarial Valuation for Earned Leave Plan,
d. Actuarial Valuation for Sick Leave Plan,
e. Actuarial Valuation for Defined Benefit Pension Plans,
f. Actuarial Valuation for Post-Retirement Medical Benefit Plan,
g. Actuarial Valuation for Settlement Allowances on Retirement,
h. Actuarial Valuation for Long Service Award Plans/Incentive Plans,
i. Actuarial Valuation for Interest Rate Guarantee for Exempted Provident Funds,
j. Actuarial Valuation for other Defined Benefit,
The Actuarial Valuations are required by the Indian Companies in the following events: -
1. For making the Initial & Annual Contribution into Gratuity Trust Account for Investment in Compulsory Gratuity Insurance.
2. Annually, Half Yearly and Quarterly for making provision of Gratuity Liability in BS as Accounting Standards (i.e., AS 15 Revised 2005) and IndAS 19) per Section 133 of the Companies Act, 2013
3. On The Date of Transfer of Employees from One Company to Another
4. On the Date of Acquisition
5. On the Date of De-merger
6. For Submission of Actuarial Reports of the last 5 years in SEBI for Listing on Share Market
7. For the assessment of Actuarial Liability for Taking Grant from any Ministry
Our Team – We have a team of highly skilled personnel equipped with the expertise-statistical, actuarial, and analytical essential to meet the changing needs of Accounting Standards. Our human resources are our strength and asset. We have an office with adequate Infrastructure (Computer Hardware). We also have a team of Legal Consultants, Taxation Consultants, Actuarial Valuation Consultants & Merchant Bankers Consultants to attend all critical cases related to Employee Benefits Actuarial Valuations and Trust Formation.
Our Clients: - We have more than 1000 clients spread in all sectors of the Indian Economy in the Public & Private Sectors which covers areas of Manufacturing, Software, Technology, Electricity, Electronics, Call Centers, Banks, Schools, Universities, Educational Institutes, IIT’s, Hotels, Hospitals, Hospitality Companies, etc.
For Regular Updates on the Gratuity Compliances, Follow the Gratuity Trust Fund Consultant (GTFC) channel on WhatsApp: https://whatsapp.com/channel/0029VaaI6RnKrWQyaNsoWZ1D
From India, Delhi
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Generally, Gratuity Trusts are formed by the most reputed Indian & multinational companies as per provisions of in terms of Part C of Fourth Schedule of Income Tax Act, 1961 in irrevocable System for compliance of Section 4A of the Payment of Gratuity Act, 1972 and getting the Tax Benefits available under Section 36 (i) (v) and 10 (25) (iv) of Income Tax Act, 1961.
Gratuity Trust Fund Consultant is a Leading Corporate Consulting Firm served more than 1000 Most Reputed Indian & multinational companies with Actuarial Valuation, Legal, Gratuity Insurance, and Gratuity Trust Investment Solutions for Employee Benefit (i.e., Gratuity, Leave Encashment, Pension, PRMB etc.).
GTFC is actively involved in providing End to End Consultation for effectively implementing Accounting, Actuarial, and Legal compliances of the Payment of Gratuity Act, 1972, The Payment of Gratuity Rules, 1973 & Accounting Standards (AS 15 Revised 2005, IndAS 19 & IAS 19-IFRS) applicable on Indian & multinational establishments. The details of Actuarial, Legal, Insurance, and Investment Compliances related to Gratuity Benefits and other Defined Benefits are as under: -
1. Gratuity Trust Solutions
The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC’s, Schools, Hospitals, NGO’s, Trust’s and other business entities) having more than 10 employees in the past 12 months before the Balance Sheet date. For the purpose of effectively implementing the Payment of Gratuity Act, 1972, the following compliances and penal provisions (i.e. Refer Section 9 in the Payment of Gratuity Act, 1972) are imposed on Establishments by the Competent Authority (i.e., Deputy Labor Commissioner) regulating the Provisions of the Payment of Gratuity Act, 1972: -
a. Registration of Establishment (i.e., Submission of Form A – Notice of Opening in DLC Office)
b. Maintenance of Records Nominees of Employees in Form F (i.e., For the payment of Death Gratuity)
c. Maintenance of Records other Forms as prescribed in Rule 3 to 6 of the Payment of Gratuity Rules
d. Compulsory Gratuity Insurance – Compulsorily applicable to Indian, US, UK, UAE, Japanese, European, Asian Companies registered with DLC Offices in the jurisdiction of Karnataka, Telangana, and Andhra Pradesh.
e. Establishment of the CIT Approved Gratuity Trust for Compulsory Gratuity Insurance.
f. Investment of Gratuity Trust Money into Compulsory Gratuity Insurance through Group Gratuity Schemes of Insurance companies such as:
a. SBI Life Insurance Company Limited
b. Life Insurance Corporation of India
c. Pramerica Life Insurance Limited
d. Bajaj Allianz Life Insurance Co. Ltd
e. ICICI Prudential Life Insurance Company Limited
g. The Process of Establishment of Gratuity Trust for Compulsory Gratuity Insurance requires Establishment to Involve in the following process: -
I. Vetting of Board Resolution for Gratuity Trust Formation,
II. Vetting of Gratuity Trust Deed,
III. Vetting of Gratuity Trust Rules &
IV. Vetting of Application under Section 9 for Approval from CIT in terms of Rule 109 of Income Tax Rules, 1962
Furthermore, if there is any amendment happened in changes indicated below then Vetting of Deed of Variations and Applications to CIT are required by Trustees/Companies for taking Approvals from CIT for retention of CIT Approval for Gratuity Trust in terms of Part C of Schedule IV of Income Tax Act, 1961 for getting the tax benefits under Section under Section 36 (i) (v) and 10 (25) (iv) of Income Tax Act, 1961 even after the following changes: -
a) Change in Name of Trust,
b) Change in Address of Trust,
c) Change in Trustees,
d) Change in Investment Pattern of Gratuity Funds from 1 Insurer to another
e) Change in Benefit Formulae for Gratuity Benefits
f) Change in Retirement Age of Employees
g) Change in Object of Trust
h) Change in Trust Rules
i) For winding up of Trust due to winding up of the Company
j) For Transfer of Gratuity Fund from one Trust to another in Event of Merger or De-merger
h. All matter related to Old Gratuity Trusts and Group Gratuity Schemes such as Vetting work of Deed of Variations, Application, Board Resolution, and Application to Bank, LIC & CIT in various events such as Merger, De-merger, Acquisitions, etc.
2. Actuarial Valuation Solutions
As per provisions of Section 129 of the Companies Act 2013, Indian and Multinational Companies Operating India needs to prepare the Financial Statement such as Balance Sheet & Profit/Loss Accounts at the closure of each financial year in compliance with Accounting Standards as stipulated in Section 133 of the Companies Act 2013, so that they can give a true and fair view of the state of affairs of the company. Accounting and Disclosure requirements for Employee Benefits Plans are laid down in the following 2 Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI): -
A. Indian Accounting Standard for Accounting of Employees Benefits
INDIAN GAAP- AS-15 (Revised 2005)
IndAS-19
B. Global Accounting Standard for Accounting of Employees Benefits
International Accounting Standard (IAS-19 Revised 2011) of the IFRS
US GAAP – (FAS-87, 88 & 158) etc.
Generally, Actuarial Valuations for compliance with the above Accounting Standards are required for the following Employee Benefit Plans under: -
a. Actuarial Valuation for Gratuity Plans,
b. Actuarial Valuation for End of Service Benefit Plan,
c. Actuarial Valuation for Earned Leave Plan,
d. Actuarial Valuation for Sick Leave Plan,
e. Actuarial Valuation for Defined Benefit Pension Plans,
f. Actuarial Valuation for Post-Retirement Medical Benefit Plan,
g. Actuarial Valuation for Settlement Allowances on Retirement,
h. Actuarial Valuation for Long Service Award Plans/Incentive Plans,
i. Actuarial Valuation for Interest Rate Guarantee for Exempted Provident Funds,
j. Actuarial Valuation for other Defined Benefit,
The Actuarial Valuations are required by the Indian Companies in the following events: -
1. For making the Initial & Annual Contribution into Gratuity Trust Account for Investment in Compulsory Gratuity Insurance.
2. Annually, Half Yearly and Quarterly for making provision of Gratuity Liability in BS as Accounting Standards (i.e., AS 15 Revised 2005) and IndAS 19) per Section 133 of the Companies Act, 2013
3. On The Date of Transfer of Employees from One Company to Another
4. On the Date of Acquisition
5. On the Date of De-merger
6. For Submission of Actuarial Reports of the last 5 years in SEBI for Listing on Share Market
7. For the assessment of Actuarial Liability for Taking Grant from any Ministry
Our Team – We have a team of highly skilled personnel equipped with the expertise-statistical, actuarial, and analytical essential to meet the changing needs of Accounting Standards. Our human resources are our strength and asset. We have an office with adequate Infrastructure (Computer Hardware). We also have a team of Legal Consultants, Taxation Consultants, Actuarial Valuation Consultants & Merchant Bankers Consultants to attend all critical cases related to Employee Benefits Actuarial Valuations and Trust Formation.
Our Clients: - We have more than 1000 clients spread in all sectors of the Indian Economy in the Public & Private Sectors which covers areas of Manufacturing, Software, Technology, Electricity, Electronics, Call Centers, Banks, Schools, Universities, Educational Institutes, IIT’s, Hotels, Hospitals, Hospitality Companies, etc.
For Regular Updates on the Gratuity Compliances, Follow the Gratuity Trust Fund Consultant (GTFC) channel on WhatsApp: https://whatsapp.com/channel/0029VaaI6RnKrWQyaNsoWZ1D
From India, Delhi
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AP Compulsory Gratuity Insurance Rule 2011- Notification.pd f