Investment of gratuity fund in unit linked investment portfolio will reduce business costs. A good plan will help you reward your employees well without a financial impact on your business.
Group Gratuity Scheme creates gratuity benefits for the employees. It can also provide death benefits and financial security to the family members of the employee insured under this scheme.
Annual gratuity contribution by employers is an expenditure for tax calculation. Gratuity income is exempted from tax up to a limit specified and subject to conditions under section 10(10).
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Group gratuity insurance plan helps an employer to meet their statutory liability towards gratuity. As per the Payments of the Gratuity Act, an employer is liable to pay a lumpsum for every year of service rendered by the employee. A gratuity plan helps cover this liability by managing a provision fund and insuring the death of an employee. A regular payment towards the gratuity provision fund enables better fund management and also attracts tax benefits.
An employer chooses to invest a certain amount of money to be able to meet the organization’s gratuity liability. This amount is then invested in a range of equity and debt funds to provide returns over a long period of time. The lump sum amount created in this process is then used to pay gratuity claims for employees who exit the organization.
Below are a few services that are part of the group gratuity policy:
To the employee-
To the employer-
Below are the eligibility criteria for obtaining a group gratuity insurance for employee benefit:
|Metrics||Minimum Value||Maximum Value|
|Age of entry||18 years||75 years|
|Age at policy renewal||-||80 years|
|Group Size||10 members||No limit|
|Contribution||Rs. 10,000||No limit|
The first step in putting together a group gratuity plan is to get an actuarial valuation of accumulated liabilities. The second step is to identify a suitable insurer who will manage the plan. Insurers can be selected based upon the past returns generated by the gratuity fund. The third step is to set up a trust and put the gratuity plan in place.
There is no minimum eligibility period for gratuity payment in case of death or disablement. As per the Gratuity Act, gratuity is payable to the nominee of an employee irrespective of the completion of 5 years of service in case of death of an employee. In case of death of an employee, the gratuity is calculated based on the tenure of service of the employee. However, the amount can be maximum ₹20 lakhs. Along with the gratuity fund, the nominee also receives other dues such as salary benefits, statutory bonuses, etc. in case of death of an employee on service.
Future Service Gratuity plan works as an insurance. They resemble a life insurance plan wherein death benefits are provided to the nominee. Employees covered under such a group gratuity policy taken by a company are eligible for gratuity payment till retirement. This essentially means that, the gratuity benefit received by the nominee will be calculated for a future period, till the retirement age of the employee (if they had survived).
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