Group Gratuity Scheme

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 Insurer should help the company in creating an asset to meet the Gratuity liabilities of the company in most tax efficient manner.

Gratuity is a statutory benefit to be provided to an employee as per the Payment of Gratuity Act, 1972. It is a lump sum amount paid out to an employee, upon his exit from employment and fulfilling the criteria prescribed in the gratuity Act. These statutory payments to employees create a gratuity liability for you as an employer. As an employer, one of your paramount concerns will be availability of sufficient funds to meet your company’s obligation for these gratuity payments.

While Gratuity is a statutory obligation it is also a very important tool today to create employee loyalty. A comprehensive gratuity plan can help organizations reduce both business costs and corporate tax. Insurer manages your gratuity liability effectively and also helps you release resources for other business activities. Gratuity is not just a statutory obligation but also a very important tool today to retain and attract talented employees. However, gratuity liability of the employer tends to increase with an increase in the salary and tenure of employment.  A comprehensive and effective gratuity plan will help you in reducing business costs and meet the funding needs to make gratuity payments. It will also help you avail tax benefits as applicable to approved gratuity funds.

 Features and benefits of the scheme:

  • Employees’ Gratuity trust needs to be set up as per provisions of Income Tax Act – we provide necessary assistance and guidance in this process.
  • Insurer maintains the fund under the name of the trust.
  • Investment of funds is taken care by Insurer 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 insurer to make payment of Gratuity as per scheme to the trust.
  • The insurance scheme of insurer provides future service gratuity in case of unfortunate death of the member at a very reasonable cost.
  • Unit linked & Endowment linked returns and long-term investment growth
  • Regular Additions for higher fund sizes
  • Choice of funds
  • Fund management under interest accumulation system
  • Claim settlement on exit as per company      rules/gratuity act
  • Built in Insurance arrangement for the employees for future service
  • MIS related to Income Tax and trusts accounts and Actuarial valuation.
  • Life insurance coverage for employees advantages

Eligibility:  

  • Eligibility:  Employer – Employee groups
  • Minimum Group size:  10 employees
  • Plan options: Unit linked & Endowment
  • Entry age Min: 18 years  (Last birthday):
  • Entry age Max: As per scheme rules, subject to maximum of 79 years (Last birthday):
  • Maximum Maturity age (Last birthday) As per scheme rules, subject to maximum of 80 years
  • Policy Term : 1 year (Yearly renewable)
  • Sum Assured : Min: 1,000
  • Sum Assured :  Max: As defined in the scheme rule
  • Gratuity Contribution Min: 2,00,000 at inception
  • Gratuity Contribution  Max: No limit
  • Premium paying term: Yearly/ Half yearly/ Quarterly/ Monthly
  • Scheme administration: Monthly addition and deletion of members

Tax Benefits :

            Employer:

The premium is not treated as perks in the hands of the employees

Under section 10(10) of the Income Tax Act,

1. For Government employees : Gratuity received is tax free

2. Employees not covered under Gratuity Act :tax free upto lower of

  • Rs.10 Lakhs
  • Half months average Salary * No. of completed year of services

3. For Employees covered under Gratuity Act : tax free upto lower of

  • Rs.10 Lakhs
  • 15/26 * last drawn salary * no. of years of completed service or part thereof in excess of 6 months

What are the benefits of funding group gratuity?

  •  Scheme setup assistance – Insurer shall assist in customizing solutions specific to your needs and adhering to the gratuity act.
  • Assistance in liability estimation – Insurer shall assist in providing an estimate of your gratuity liability
  • Manage your investments – Insurer offers a complete and competitive range of investment options keeping your needs in mind. The two investment plans are available
  • Unit linked funds are market linked investments which help you to get good returns and empower you as an employer to decide the asset allocation best suiting their needs.
  • Whereas the Endowment fund aims at offering a steady appreciation of your investments also guaranteeing the capital invested by you.
  • Dedicated service team – Insurance Companies understands that service is of utmost importance to maintain a long term sustainable relationship. and hence we have a dedicated group service team which appoints a relationship manager who would be dedicated to service your requirements.
  • Claim Settlement – Insurance Companies undertakes to settle claims and payouts within specified turnaround time.

 Documents :

  • Age of Employee
  • Date of Birth of employee
  • Date of Joining.
  • Salary + DA.
  • Age of retirement.

We provide above services for following Insurance Companies:-  AEGON Religare Life Insurance Company Ltd. , Aviva Life Insurance Company India Ltd, Bajaj Allianz Life Insurance Company Ltd ., Bharti AXA Life Insurance Company Ltd., Birla Sun Life Insurance Co. Ltd, Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd., DLF Pramerica Life Insurance Co. Ltd.,  Edelweiss Tokio Life Insurance Co. Ltd. , Future Generali India Life Insurance Company Ltd, HDFC Standard Life Insurance Co. Ltd , ICICI Prudential Life Insurance Co. Ltd, IDBI Federal Life Insurance Company Ltd., IndiaFirst Life Insurance Company Ltd, ING Vysya Life Insurance Company Ltd., Kotak Mahindra Old Mutual Life Insurance Ltd , Life Insurance Corporation of India , Max Life Insurance Co. Ltd , PNB Metlife India Insurance Co. Ltd,  Reliance Life Insurance Company Ltd., Sahara India Life Insurance Co, Ltd. , SBI Life Insurance Co. Ltd , Shriram Life Insurance Co, Ltd., Star Union Dai-ichi Life Insurance Co. Ltd, Tata AIA Life Insurance Company Ltd .

4 comments

  1. Chidambar Bhaskar Samant

    Do you have details of gratuity schemes {i.e. gratuity rate w.r.t number of years of service] in Pune industries.

  2. Priyanka

    This is to enquire switching investment in Group Gratuity Fund Plans

    My company already has an approved Group Gratuity Trust which has invested funds in Group Gratuity Plan of an Insurance company.

    We are planning to switch our Group Gratuity Investments into plan of another Insurance Company and would request you to let me know the procedure for the same.

    Also, we had taken approval from Commissioner of Income Tax while forming this trust. Please confirm if prior approval from Commission of Income Tax is again required in order to switch our funds in Group Gratuity Plan.

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