Gratuity act

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Rutesh (Querist)
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10 January 2014 Dear members, I am doing an audit of a Pvt ltd company and wanna know the applicability of Gratuity act to the company. There are 370 employees in this company and the company has not enrolled into gratuity act. so what liability would this company faces for the non compliance of this act

@VaibhavJ

@VaibhavJ (Expert)
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11 January 2014 Hi

Company is required to get its actuarial valuation on every reporting date & on the basis of actuary they are required to report their liability.

Thanks

Rutesh

Rutesh (Querist)
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11 January 2014 thanks for your reply sir,
but this company isnt registered with gratuity act so calling the valuator isnt possible at this moment.
Sir i have calculated all the employees gratuity at 4.33% on their basic salary.only those employees salary if this act is applicable to the company then this would be their liability for the current year.

can you correct me if i am wrong

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@VaibhavJ

@VaibhavJ (Expert)
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11 January 2014 No, You need to take actuary valuation.

Pl read for applicability of Gratuity Act.

https://www.caclubindia.com/articles/a-look-at-the-payment-of-gratuity-act-1972-15682.asp

Thanks

Rutesh

Rutesh (Querist)
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11 January 2014 sir can you elaborate your answer of actuary valuation. i have already gone through the link and it just says that the employer has to pay gratuity amount to the employee who has completed their 5 years of continuous services. and on the point of applicability it is applicable as the company has 370 employees and the minimum requirement is 10-12 employee at any day of the year.

@VaibhavJ

@VaibhavJ (Expert)
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11 January 2014 Hi

I meant to say Gratuity Act is applicable!

Now as far as valuation of Gratuity is then it should be as per AS 15.

Thanks

SURESH

SURESH (Expert)
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04 November 2014 Gratuity valuation should be as per AS 15 (R) which can be performed by the Actuary.