Why Actuarial Valuation is required by the Public, Private and Multinational Indian Companies with more than 10 employees for compliance of AS 15 (Revised 2005) on Actuarial Valuation Basis instead of any other rational Method” for Compliance of Accounting Standard 15 (Revised 2005) ?

 Background

Indian Public Sector, Private Sector and Multinational Companies need to prepare the Financial Statement such as Balance Sheet & Profit/Loss Accounts at the closure of each financial year as per provisions of Section 129 of the Companies Act 2013. As per provisions of Section 133 of the Companies Act 2013, Financial Statements should be prepared in compliance of Accounting Standards as stipulated by the Ministry of Corporate Affairs so that they can give a true and fair view of the state of affairs of the company. 

Why Actuarial Valuation for Accounting of Gratuity Benefit?

Gratuity Benefit as an Employee Benefit Falls in the category of Defined Benefit and further categorized as Post Employment Benefit Obligation. Accounting and Disclosure requirements  for Defined Benefit Plan is laid down in the following 2 Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI):- 

1. Accounting Standard 15 (Revised 2005) – AS 15 (Revised 2005)

2. Indian Accounting Standard 19 – IndAS 19

 

The main objectives of the above Standards are to prescribe the guidelines and disclosures for Accounting for Defined Benefit Plans (i.e. Gratuity, Leave Encashment, Pension etc.). In order to comply with above standards a company is required to recognize: -

(a) a liability when an employee has provided service to company in exchange for defined benefits to be paid in the future; and

(b) an expense when the company consumes the economic benefit arising from service provided by an employee in exchange for defined benefits. 

I produce here in below few para’s of AS 15 (Revised 2005) & Guidance Note on the Revised Schedule IV to the Companies Act, 1956  which may help CA/CS/Auditors to understand “Why  Actuarial Valuation is required by the Public, Private and Multinational Indian Companies with more than 10 employees for compliance of AS 15 (Revised 2005)  on Actuarial Valuation Basis instead of any other rational Method” for Compliance of the above Accounting Standard 15 (Revised 2005) – AS 15 (Revised 2005)” The Para 49, Para 50 and Para 51 of AS 15 (Revised 2005) prescribes requirements of Actuarial Valuation Method for Accounting of Defined Benefits and Steps for Computation of Defined Benefit Plans. These paras are produced herein below –

Para 49. - Post-employment Benefits: Defined Benefit Plans

Accounting for Employee Benefit Plans falls in the category of Defined Benefit is complex because actuarial assumptions are required to measure the obligation and the expense and there is a possibility of actuarial gains and losses.  Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service. While the Standard requires that it is the responsibility of the reporting enterprise to measure the obligations under the defined benefit plans, it is recognized that for doing so the enterprise would normally use the services of a qualified actuary.

Para 50. - Recognition and Measurement

Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an enterprise, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting enterprise and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an enterprise’s ability to make good any shortfall in the fund’s assets. Therefore, the enterprise is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently, the expense recognized for a defined benefit plan is not necessarily the amount of the contribution due for the period.

Para 51. - Accounting by an enterprise for defined benefit plans involves the following steps:

(a) using actuarial techniques to make a reliable estimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. This requires an enterprise to determine how much benefit is attributable to the current and prior periods (see paragraphs 68-72) and to make estimates (actuarial assumptions) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will influence the cost of the benefit (see paragraphs 73-91);

(b) discounting that benefit using the Projected Unit Credit Method in order to determine the present value of the defined benefit obligation and the current service cost (see paragraphs 65-67);

(c) determining the fair value of any plan assets (see paragraphs 100102);

(d) determining the total amount of actuarial gains and losses (see paragraphs 92-93);

(e) where a plan has been introduced or changed, determining the resulting past service cost (see paragraphs 94-99); and

(f) where a plan has been curtailed or settled, determining the resulting gain or loss (see paragraphs 110-116).

Where an enterprise has more than one defined benefit plan, the enterprise applies these procedures for each material plan separately.

 

Para 7.3 of Guidance Note on the revised schedule vi to the companies act, 1956

 

For the purpose of Revised Schedule VI, a company also needs to classify its employee benefit obligations as current and non-current categories. While AS-15 Employee Benefits governs the measurement of various employee benefit obligations, their classification as current and noncurrent liabilities will be governed by the criteria laid down in the Revised Schedule VI. In accordance with these criteria, a liability is classified as “current” if a company does not have an unconditional right as on the Balance Sheet date to defer its settlement for twelve months after the reporting date. Each company will need to apply these criteria to its specific facts and circumstances and decide an appropriate classification of its employee benefit obligations. Given below is an illustrative example on application of these criteria in a simple situation:

(a) Liability toward bonus, etc., payable within one year from the Balance Sheet date is classified as “current”.

(b) In case of accumulated leave outstanding as on the reporting date, the employees have already earned the right to avail the leave and they are normally entitled to avail the leave at any time during the year. To the extent, the employee has unconditional right to avail the leave, the same needs to be classified as “current” even though the same is measured as ‘other long-term employee benefit’ as per AS-15. However, whether the right to defer the employee’s leave is available unconditionally with the company needs to be evaluated on a case to case basis – based on the terms of Employee Contract and Leave Policy, Employer’s right to postpone/deny the leave, restriction to avail leave in the next year for a maximum number of days, etc. In case of such complexities the amount of Non-current and Current portions of leave obligation should normally be determined by a qualified Actuary. 

(c) Regarding funded post-employment benefit obligations, amount due for payment to the fund created for this purpose within twelve months is treated as “current” liability. Regarding the unfunded postemployment benefit obligations, a company will have settlement obligation at the Balance Sheet date or within twelve months for employees such as those who have already resigned or are expected to resign (which is factored for actuarial valuation) or are due for retirement within the next twelve months from the Balance Sheet date. Thus, the amount of obligation attributable to these employees is a “current” liability. The remaining amount attributable to other employees, who are likely to continue in the services for more than a year, is classified as “non-current” liability. Normally the actuary should determine the amount of current & non-current liability for unfunded post-employment benefit obligation based on the definition of Current and Non-current assets and liabilities in the Revised Schedule VI.

How to Identify the Compliance requirement for Indian and Multinational Companies ? 

As per payment of Gratuity Act 1972 (amended), All Indian Private and Multinational Companies with more than 10 employees covered under the preview of this Act.  CA, CS & Auditors should follow the following criteria to know the Accounting and Disclosure requirement for Provision of Gratuity Benefit Liabilities in the Financial Statements of the Companies: -

(i) SME Companies - SME requires to give disclosures as per Clause L of Para 120 of AS 15 (Revised 2005) - (For more details refer MCA notification dated 07.12.2006 ) 

(ii) Non SME Companies – Non SME requires to give disclosures as per Para 120 of AS 15 (Revised 2005)

(iii) Listed Companies & their subsidiaries with Net-worth more 250 cr. – In this case, companies and their subsidiaries has to give disclosure of in compliance of IndAS 19.

(iv) NBFC (Non-Banking Financial Company) with Net-worth more 250 cr. – In this case, NBFC has to give disclosure of in compliance of IndAS 19 with comparative numbers of previous 2 years. 

Why Non-Compliance of AS 15 (Revised 2005) & IndAS19 needs to be observed by the CA, CS & Auditors of the Indian and Multinational Companies ?

 MCA vide its notification dated 13th November 2018 notified National Financial Reporting Authority (NFRA) Rules 2018.  The main functions NFRA Authority are:-

1. Monitoring and enforcing the compliance with accounting standards and auditing standards, 

2. Overseeing the quality of Audit service and suggesting measures for improvement,

3. Power to investigate,

4. Disciplinary proceedings, Manner of enforcement of orders passed in disciplinary proceedings, Punishment in case of non-compliance etc.

In view of above provisions, it becomes mandatory for Finance Professionals (i.e. CA, CS, CMA, Finance Professionals & Directors) involved in finalization of Financial Statements to check the proper compliance and provisions of these Accounting Standards.

In case of any query or clarification on the above subject you may call me at 9211637063 or email your requirements at tikaramchaudhary@gmail.com. 

Regards

 

Tika Ram Chaudhary

Gratuity, Pension, Superannuation Trust Fund Consultant

(Corporate Consultant with more than 11 Years of experience in providing Support Services to Indian and Multinational Companies for Formation of Gratuity Trust, Formed to gain Tax Benefit available for Companies under Section 36 (1) (v) of Income Tax Act 1961 & Specialized Support Services for preparation of Inputs for Actuarial Valuations in compliance of AS 15 (Revised 2005), IndAS 19, IAS 19 (Revised 2011) - IFRS & USGAAP required by Gratuity Trust of Indian Companies)

Trade Name - Gratuity Trust Fund Consultant 

Registered Office Address: R 11, F/F, R Block, Vikas Nagar, Uttam Nagar, New Delhi -110059

Mobile Number: 9211637063

Email Id: tikaramchaudhary@gmail.com

Website:  www.gratuitytrustfund.com

LinkedIn Profile: https://www.linkedin.com/in/tika-ram-chaudhary-a5727848/

Caclubindia Profile: https://www.caclubindia.com/profile.asp?member_id=1446582

Tax Guru Profile: https://taxguru.in/author/tikaramchaudhary@gmail.com/

Blog: http://gratuitytrustfundconsultant.blogspot.com

Google Business Listing: https://gratuity-trust-fund-consultant-in-delhi-ncr.business.site/

 

(All services/consultancy is subject to terms and conditions)

 

This message and any attachment are confidential. If you are not the intended recipient please delete this message and all attachments from your system. You must not copy this message or any attachment or disclose the contents to any other person. The sender does not accept liability for any errors, omissions or consequences which arise as a result of e-mail transmission

Why Actuarial Valuation is required for Gratuity Fund and Gratuity Trust Money Investment by Indian Companies ?

 Background

Indian Public Sector, Private Sector and Multinational Companies need to prepare the Financial Statement such as Balance Sheet & Profit/Loss Accounts at the closure of each financial year as per provisions of Section 129 of the Companies Act 2013. As per provisions of Section 133 of the Companies Act 2013, Financial Statements should be prepared in compliance of Accounting Standards as stipulated by the Ministry of Corporate Affairs so that they can give a true and fair view of the state of affairs of the company. 

Why Actuarial Valuation for Accounting of Gratuity Benefit?

Gratuity Benefit as an Employee Benefit Falls in the category of Defined Benefit and further categorized as Post Employment Benefit Obligation. Accounting and Disclosure requirements  for Defined Benefit Plan is laid down in the following 2 Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI):- 

1. Accounting Standard 15 (Revised 2005) – AS 15 (Revised 2005)

2. Indian Accounting Standard 19 – IndAS 19

 

The main objectives of the above Standards are to prescribe the guidelines and disclosures for Accounting for Defined Benefit Plans (i.e. Gratuity, Leave Encashment, Pension etc.). In order to comply with above standards a company is required to recognize: -

(a) a liability when an employee has provided service to company in exchange for defined benefits to be paid in the future; and

(b) an expense when the company consumes the economic benefit arising from service provided by an employee in exchange for defined benefits. 

I produce here in below few para’s of AS 15 (Revised 2005) & Guidance Note on the Revised Schedule IV to the Companies Act, 1956  which may help CA/CS/Auditors to understand “Why  Actuarial Valuation is required by the Public, Private and Multinational Indian Companies with more than 10 employees for compliance of AS 15 (Revised 2005)  on Actuarial Valuation Basis instead of any other rational Method” for Compliance of the above Accounting Standard 15 (Revised 2005) – AS 15 (Revised 2005)” The Para 49, Para 50 and Para 51 of AS 15 (Revised 2005) prescribes requirements of Actuarial Valuation Method for Accounting of Defined Benefits and Steps for Computation of Defined Benefit Plans. These paras are produced herein below –

Para 49. - Post-employment Benefits: Defined Benefit Plans

Accounting for Employee Benefit Plans falls in the category of Defined Benefit is complex because actuarial assumptions are required to measure the obligation and the expense and there is a possibility of actuarial gains and losses.  Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service. While the Standard requires that it is the responsibility of the reporting enterprise to measure the obligations under the defined benefit plans, it is recognized that for doing so the enterprise would normally use the services of a qualified actuary.

Para 50. - Recognition and Measurement

Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an enterprise, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting enterprise and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an enterprise’s ability to make good any shortfall in the fund’s assets. Therefore, the enterprise is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently, the expense recognized for a defined benefit plan is not necessarily the amount of the contribution due for the period.

Para 51. - Accounting by an enterprise for defined benefit plans involves the following steps:

(a) using actuarial techniques to make a reliable estimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. This requires an enterprise to determine how much benefit is attributable to the current and prior periods (see paragraphs 68-72) and to make estimates (actuarial assumptions) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will influence the cost of the benefit (see paragraphs 73-91);

(b) discounting that benefit using the Projected Unit Credit Method in order to determine the present value of the defined benefit obligation and the current service cost (see paragraphs 65-67);

(c) determining the fair value of any plan assets (see paragraphs 100102);

(d) determining the total amount of actuarial gains and losses (see paragraphs 92-93);

(e) where a plan has been introduced or changed, determining the resulting past service cost (see paragraphs 94-99); and

(f) where a plan has been curtailed or settled, determining the resulting gain or loss (see paragraphs 110-116).

Where an enterprise has more than one defined benefit plan, the enterprise applies these procedures for each material plan separately.

 

Para 7.3 of Guidance Note on the revised schedule vi to the companies act, 1956

 

For the purpose of Revised Schedule VI, a company also needs to classify its employee benefit obligations as current and non-current categories. While AS-15 Employee Benefits governs the measurement of various employee benefit obligations, their classification as current and noncurrent liabilities will be governed by the criteria laid down in the Revised Schedule VI. In accordance with these criteria, a liability is classified as “current” if a company does not have an unconditional right as on the Balance Sheet date to defer its settlement for twelve months after the reporting date. Each company will need to apply these criteria to its specific facts and circumstances and decide an appropriate classification of its employee benefit obligations. Given below is an illustrative example on application of these criteria in a simple situation:

(a) Liability toward bonus, etc., payable within one year from the Balance Sheet date is classified as “current”.

(b) In case of accumulated leave outstanding as on the reporting date, the employees have already earned the right to avail the leave and they are normally entitled to avail the leave at any time during the year. To the extent, the employee has unconditional right to avail the leave, the same needs to be classified as “current” even though the same is measured as ‘other long-term employee benefit’ as per AS-15. However, whether the right to defer the employee’s leave is available unconditionally with the company needs to be evaluated on a case to case basis – based on the terms of Employee Contract and Leave Policy, Employer’s right to postpone/deny the leave, restriction to avail leave in the next year for a maximum number of days, etc. In case of such complexities the amount of Non-current and Current portions of leave obligation should normally be determined by a qualified Actuary. 

(c) Regarding funded post-employment benefit obligations, amount due for payment to the fund created for this purpose within twelve months is treated as “current” liability. Regarding the unfunded postemployment benefit obligations, a company will have settlement obligation at the Balance Sheet date or within twelve months for employees such as those who have already resigned or are expected to resign (which is factored for actuarial valuation) or are due for retirement within the next twelve months from the Balance Sheet date. Thus, the amount of obligation attributable to these employees is a “current” liability. The remaining amount attributable to other employees, who are likely to continue in the services for more than a year, is classified as “non-current” liability. Normally the actuary should determine the amount of current & non-current liability for unfunded post-employment benefit obligation based on the definition of Current and Non-current assets and liabilities in the Revised Schedule VI.

How to Identify the Compliance requirement for Indian and Multinational Companies ? 

As per payment of Gratuity Act 1972 (amended), All Indian Private and Multinational Companies with more than 10 employees covered under the preview of this Act.  CA, CS & Auditors should follow the following criteria to know the Accounting and Disclosure requirement for Provision of Gratuity Benefit Liabilities in the Financial Statements of the Companies: -

(i) SME Companies - SME requires to give disclosures as per Clause L of Para 120 of AS 15 (Revised 2005) - (For more details refer MCA notification dated 07.12.2006 ) 

(ii) Non SME Companies – Non SME requires to give disclosures as per Para 120 of AS 15 (Revised 2005)

(iii) Listed Companies & their subsidiaries with Net-worth more 250 cr. – In this case, companies and their subsidiaries has to give disclosure of in compliance of IndAS 19.

(iv) NBFC (Non-Banking Financial Company) with Net-worth more 250 cr. – In this case, NBFC has to give disclosure of in compliance of IndAS 19 with comparative numbers of previous 2 years. 

Why Non-Compliance of AS 15 (Revised 2005) & IndAS19 needs to be observed by the CA, CS & Auditors of the Indian and Multinational Companies ?

 MCA vide its notification dated 13th November 2018 notified National Financial Reporting Authority (NFRA) Rules 2018.  The main functions NFRA Authority are:-

1. Monitoring and enforcing the compliance with accounting standards and auditing standards, 

2. Overseeing the quality of Audit service and suggesting measures for improvement,

3. Power to investigate,

4. Disciplinary proceedings, Manner of enforcement of orders passed in disciplinary proceedings, Punishment in case of non-compliance etc.

In view of above provisions, it becomes mandatory for Finance Professionals (i.e. CA, CS, CMA, Finance Professionals & Directors) involved in finalization of Financial Statements to check the proper compliance and provisions of these Accounting Standards.

In case of any query or clarification on the above subject you may call me at 9211637063 or email your requirements at tikaramchaudhary@gmail.com. 

Regards

 

Tika Ram Chaudhary

Gratuity, Pension, Superannuation Trust Fund Consultant

(Corporate Consultant with more than 11 Years of experience in providing Support Services to Indian and Multinational Companies for Formation of Gratuity Trust, Formed to gain Tax Benefit available for Companies under Section 36 (1) (v) of Income Tax Act 1961 & Specialized Support Services for preparation of Inputs for Actuarial Valuations in compliance of AS 15 (Revised 2005), IndAS 19, IAS 19 (Revised 2011) - IFRS & USGAAP required by Gratuity Trust of Indian Companies)

Trade Name - Gratuity Trust Fund Consultant 

Registered Office Address: R 11, F/F, R Block, Vikas Nagar, Uttam Nagar, New Delhi -110059

Mobile Number: 9211637063

Email Id: tikaramchaudhary@gmail.com

Website:  www.gratuitytrustfund.com

LinkedIn Profile: https://www.linkedin.com/in/tika-ram-chaudhary-a5727848/

Caclubindia Profile: https://www.caclubindia.com/profile.asp?member_id=1446582

Tax Guru Profile: https://taxguru.in/author/tikaramchaudhary@gmail.com/

Blog: http://gratuitytrustfundconsultant.blogspot.com

Google Business Listing: https://gratuity-trust-fund-consultant-in-delhi-ncr.business.site/

 

(All services/consultancy is subject to terms and conditions)

 

This message and any attachment are confidential. If you are not the intended recipient please delete this message and all attachments from your system. You must not copy this message or any attachment or disclose the contents to any other person. The sender does not accept liability for any errors, omissions or consequences which arise as a result of e-mail transmission

The Payment of Gratuity Act, 1972 compliances applicable on US, UAE, UK, Russian, Asian, Japanese, Nepalese, Chinese Multinational Companies

    

Tika Ram Chaudhary

             Gratuity Trust Fund Consultant

(Corporate Consultant with more than 15 Years of Experience in Providing Consultancy Services to Indian Public, Private and MNC’s for Formation of Registered & Approved Gratuity Trust in Terms of Part C of Schedule IV of Income Tax Act, 1961 & Related Matters. We also provide Specialized Support Services to Companies for preparation of Actuarial Inputs required for Employee Benefits Actuarial Valuations for compliance of AS 15 (Revised 2005), IndAS19, IAS 19 (Revised 2011) & US GAAP)

Office Address - R-11, First Floor, Vikas Nagar, Uttam Nagar, New Delhi - 110059 (India)

Mobile No.: 9211637063

Website: www.gratuitytrustfund.com

E-mail: tikaramchaudhary@gratuitytrustfund.com

Background

The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC's, Private Schools, Private Colleges, Private Universities, NGO's, Autonomous Bodies and Other business entities) having more than 10 employees. 

Gratuity is a statutory right of employee whoever completes 5 years in the same Establishment and is a terminal benefit, it means gratuity amount will be determined when the monthly terminal wages of the employee are known to Establishment. 

The cost is to be borne by the Employer and not by the Employee hence it can neither be shown as deduction from employees salary nor as a Part of CTC of employee. 

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,- 

(a) on his superannuation, or 

(b) on his retirement or resignation, 

(c) on his death or disablement due to accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement

As per Payment of Gratuity Act, 1972, all companies with 10 or more employees are required to make the payment of Gratuity within 30 days from the date of exit of employee (Refer Section 7 of the Payment of Gratuity Act, 1972). 

For making the payment of Gratuity to employees, the company has to make the provision of Gratuity benefits based on an Actuarial Report in compliance of AS 15 (revised 2005)/ IndAS19 and create a Gratuity Trust for getting an Approved Gratuity Fund under Irrevocable system. 

The companies operating in following 3 states are mandatorily required to get Compulsory Insurance as per provisions of Section 4A of The Payment of Gratuity Act, 1972 apart from Provision of Gratuity Liability in Balance Sheet as per Actuarial Report in compliance of AS 15 (Revised 2005)/IndAS19 :-

              1. Andhra Pradesh

2. Telangana

3. Karnataka

For the companies doing business in the other states are required to make the provision of gratuity in their Balance Sheet on the basis of Actuarial Valuation in compliance of AS 15 (Revised 2005)/IndAS 19, so that they can make the payment of gratuity from their own resources and comply with The Payment of Gratuity Act, 1972.

In absence of above or non compliance of the payment of gratuity act, 1972, penalties are imposed on the company as per provisions of Section 9 of the Payment of Gratuity Act, 1972. The extract of the same is produced below:-

Section: 9 Penalties.

(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees or with both. 

(2) An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made there under shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both:

Provided that where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than [36] [Six months but which may extend to two years] unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition 01; a fine would meet the ends of justice. 

Compliance of the AS 15 (Revised 2005)/IndAS 19 for Accounting of Gratuity Benefits

At the end of each financial year, All Companies with 10 or more employees are required to prepare Balance Sheet in compliance of Section 128, 129 & 133 of The Companies Act, 2013 and required to comply with the provisions of Accounting Standard 15 (Revised 2005) /IndAS 19 for Accounting of Gratuity Benefits . The following inputs needs to be prepared by you for preparation of Actuarial Valuation Reports: 

a. Employee Data as on 31.03.2024 .
b. Assumptions (i.e. Financial and Demographic Assumptions).
c. Plan Provision for Gratuity  Plan as per company policy, different Sections of "The Payment Gratuity Act 1972" & Labor Laws.
d. Details about Qualifying Insurance Policy or Fair Value of Plan Assets, If applicable  (Refer Para 100,101 104 & 105 of AS15 (R 2005))  

e. Details of Actual Gratuity Paid during the period  01.01.2023 to 31.12.2023 (applicable in case of Full Disclosure Certificate).

     In case of Compulsory Gratuity Insurance, companies are require the following :-

                             a. An Actuarial Report for Initial Contribution to be made by the company.

                             b. Details about the traditional and Market Linked Gratuity Insurance.

                             c. Details about the process for Formation of Trust under Irrevocable System.

                             d. Details about registration of company into Deputy Labor Commissioner Office in FORM-I                                         and Form III (In Case of Karnataka, Telangana and Andhra Pradesh Companies)

                             e. Details about Form A and Form F to be maintained by companies outside Karnataka,                                                 Telangana and Andhra Pradesh

                             f. Details about Application under Rule 109 of The Income Tax Rules, 1962,to submitted to CIT                                 for approval of Gratuity Trust for getting the tax benefit under Section 36 (i)(v) and 10 (25) (iv).

Our Firm Gratuity Trust Fund Consultant - GTFC is a Leading Corporate Consulting Firm providing Actuarial Valuations and Gratuity Trust Solutions for Management of Employee Benefit (i.e. Gratuity, Leave Encashment, Pension, PRMB etc.) compliances to Schools, NGOs, Autonomous Bodies of Different Ministries of Indian Government, Indian Public, Private and Multinational Companies with employee strength more than 10. From last 15 years, our firm is actively involved in providing End to End Consultation for: -  

Gratuity Fund Solutions - The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC’s, Schools, Private Colleges, Autonomous Bodies under Different Ministries, NGOs and Other Private Business entities) having more than 10 employees. For the purpose of effectively implementing the Payment of Gratuity Act, 1972, various compliance measures are imposed on Establishments by the Controlling Authority (i.e., Deputy Labor Commissioner) Regulating the Provisions of the Payment of Gratuity Act, 1972. We provide end to end consultation for following compliances of Rule 3 of the Payment of Gratuity Rules – Notice of Opening, Change or Closure of the Establishment following Forms to be submitted by the establishment to Competent Authority (i.e. DLC Office): - 

Form A - Notice of Opening
Form B - Notice for Change in Name, Address, Employer or Nature of Business.
Form C - Notice for Closure of Establishment.
Form F - Nominations - As per provisions of Rule 6 the Payment of Gratuity Rules, All Indian Establishments with employee strength 10 or more are required to maintain the records of Form – F, so that they will have all information available to make the payment of gratuity to employee or his Nominee/Nominees within 30 Days on exit or death of employee (Refer Section 7 of the Payment of Gratuity Act, 1972)
Maintenance of Records Forms prescribed in Rules of the Payment of Gratuity Rules.

Formation of New Irrevocable Trust for Approved Gratuity Fund (Refer provisions of sub-section (3) of Section 4A – Compulsory Insurance of the Payment of Gratuity Act, 1972) and related activities such as:

Vetting of Board Resolution for Gratuity Trust Formation,

Vetting of Gratuity Trust Deed,

Vetting of Gratuity Trust Rules &

Vetting of Application for Approval from CIT in terms of Rule 109 of Income Tax Rules 1962,

Vetting of Deed of Variations and Applications required by Trustees/Companies for Approvals from CIT for Gratuity Trust in terms of Part C of Schedule IV of Income Tax Act,1961 in following cases: -  

§  Deed of variation for Change in Name of Trust,
§  Deed of variation for Change in Address of Trust,
§  Deed of variation for Change in Trustees,
§  Deed of variation for Change in Investment Pattern of Gratuity Fund,
§  Deed of variation for Change in Benefit Formulae for Gratuity Benefits,
§  Deed of variation for Change in Retirement Age of Employees,
§  Deed of variation for Change in Object of Trust
§  Deed of variation for Change in Trust Rules
§  Vetting of application to CIT for Approvals for winding up of Trust

§  Vetting of application to CIT for Approvals for Transfer of Fund in Event of Merger or Demerger

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.

B. 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 of Accounting Standards as stipulated in Section 133 of the Companies Act 2013, so that they can give a true and fair view of state of affairs of the company. Accounting and Disclosure requirements for Employee Benefits Plans is laid down in the following Accounting Standards as issued by The Institute of Chartered Accountants of India (ICAI) & other International Accounting Regulators:-

1.      Indian Accounting Standard for Accounting of Employees Benefits   

   

·        AS-15 (Revised 2005)

·        IndAS-19

2.      Global Accounting Standard for Accounting of Employees Benefits

·        IAS-19 (Revised 2011) - IFRS

·        NAS 19 - NFRS 

·        US GAAP – (FAS-87, 88 & 158) etc.  

Generally, Actuarial Valuations for compliance above Accounting Standards are required for following Employee Benefit Plans under: -

· Actuarial Valuation for Gratuity Plans,

· Actuarial Valuation for End of Service Benefit Plan,

· Actuarial Valuation for Earned Leave Plan,

· Actuarial Valuation for Sick Leave Plan,

· Actuarial Valuation for Defined Benefit Pension Plans,

· Actuarial Valuation for Post-Retirement Medical Benefit Plan,

· Actuarial Valuation for Settlement Allowances on Retirement,

· Actuarial Valuation for Long Service Award Plans/Incentive Plans,

· Actuarial Valuation for Interest Rate Guarantee for Exempted Provident Funds,

· Actuarial Valuation for other Defined Benefit

 Actuarial Valuations for above plans are required by the Indian Companies in following events:-                               

· For Actuarial assessment for Contribution into Gratuity Trust Account.

· For Actuarial assessment of Gratuity Liability in BS in compliance of AS 15 Revised 2005 & IndAS 19 as at closure of Audit on:-     

        

        · 31.03.20XX(i.e. Financial Year Closure),

        · 30.06.20XX (i.e. Q1 Closure),

        · 30.09.20XX (i.e. Q2 Closure),  

        · 31.12.20XX (i.e. Q3 Closure). 

For Actuarial assessment of Gratuity Liability of Transferred Employees from Company A to Company B in following events: - 

· On the date of Transfer within Group Companies,

· On the date of Demerger,

· On the date of Acquisition,

· For submission of Financial Statements in SEBI for Listing on Share Market.

· For Assessment of Actuarial Liability of Pension, Gratuity and other Long Term Employee Benefit Plan for taking Grant of Assets from any Ministry by any Autonomous Bodies.

Most frequently used terms used in Actuarial Reports in compliance of the above standards are: -

Present Value of obligation.
Interest Cost.
Current Service Cost.
Service Cost
Past Service Cost.
Curtailment Cost
Settlement Cost
Service Cost.
Benefit Paid.
Actuarial Gain/loss
Experience adjustment
Other Comprehensive Income.
Defined Benefit Obligation.
Statement of Profit/loss.
Interest Rate for Discounting.
Salary Escalation Rate.
Withdrawal Rate
Mortality Rate, etc. etc.

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). 

Our Clients:- Our clients are spread in all sectors of the Indian Economy in the Public & Private Sectors which covers areas of :-

· Schools,

· Universities,

· IIT’s,

· Manufacturing,

· Software,

· Technology,

· Electricity,

· Electronics,

· Call Centers,

· Banks,

· Educational Institutes,

· Hotels,

· Hospitals,

· Hospitality Companies etc. etc.

 

We are associated with more than 500 Global Multinational Companies (MNC’s). In case of any clarification/requirement on the above subject, you may send your query/requirement at tikaramchaudhary@gratuitytrustfund.com or call us at 011-45261651, 9211637063 & 9818322186.

Tika Ram Chaudhary

Founder

Gratuity Trust Fund Consultant

An MSME - Registered with Ministry Micro Small and Medium Enterprises vide Registration Number UDYAM-DL-11-0013795

(Corporate Consulting Firm providing Actuarial, Legal, Insurance and Investment Solutions for Employee Benefits (i.e. Gratuity, Leave Encashment, Pension, PRMB etc.) Trusts in compliance of the Payment of Gratuity Act, 1972, The Payment of Gratuity (Central) Rules, 1972, CCS Pension Rules, 1972,  AS 15 (Revised 2005), IndAS 19, IAS 19 (Revised 2011) – IFRS, Part C of Schedule IV of Income Tax Act, 1961 & Rule 98-111 of Income Tax Rules to Indian and Multinational Companies)

Registered Office Address: R 11, F/F, R Block, Vikas Nagar, Uttam Nagar, New Delhi -110059

Mobile Number: 9211637063, 9818322186

Landline Number: 011-45261651 

Email Id: tikaramchaudhary@gratuitytrustfund.com  & tikaramchaudhary@gmail.com

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Website: www.gratuitytrustfund.com

Blog: http://gratuitytrustfundconsultant.blogspot.com

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Our Terms & Conditions: - All services provided by him are subject to terms & conditions stated when a job is accepted.