Gratuity Trust for IT company

 Gratuity Trust: Overview A Gratuity Trust is a type of trust fund created by an employer to manage and administer gratuity benefits for its employees.

The trust is typically funded by the employer, and the funds are invested to generate returns.

 Benefits of Gratuity Trust *Employee Benefits*

1. *Early Gratuity Payment*: As you experienced in your previous company, a Gratuity Trust can provide gratuity benefits to employees even if they haven't completed 5 years of service.

2. *Tax Benefits*: Gratuity received from a trust is exempt from tax up to ₹20 lakhs.

3. *Secured Benefits*: The trust fund ensures that gratuity benefits are secured and paid to employees even in case of the employer's financial difficulties.

*Employer Benefits*

1. *Tax Benefits*: Employers can claim tax deductions on contributions made to the trust.

 2. *Reduced Liability*: By creating a trust, employers can reduce their liability for gratuity payments.

3. *Improved Employee Morale*: Offering gratuity benefits through a trust can enhance employee morale and retention. Formation of Gratuity Trust To form a Gratuity Trust,

 your employer will need to:

 1. *Create a Trust Deed*: A trust deed outlining the terms and conditions of the trust, including the trust's objectives, funding, and benefit structure.

2. *Appoint Trustees*: The employer will need to appoint trustees to manage the trust fund.

3. *Fund the Trust*: The employer will need to contribute funds to the trust, which will be invested to generate returns. .

4. *Register the Trust*: The trust will need to be registered with the relevant authorities, such as the Income Tax Department.

Advising Your Current Employer You can share the following points with your current employer: 

1. *Benefits of Gratuity Trust*: Highlight the benefits of creating a Gratuity Trust, including tax benefits, reduced liability, and improved employee morale.

2. *Flexibility in Gratuity Payment*: Explain how a Gratuity Trust can provide flexibility in gratuity payment, allowing employees to receive benefits even before completing

5 years of service. 3. *Competitive Advantage*: Emphasize how offering gratuity benefits through a trust can be a competitive advantage in attracting and retaining top talent. By presenting these points, you can help your employer understand the benefits of creating a Gratuity Trust and how it can positively impact both employees and the organization.

Our Firm “Gratuity Trust Fund Consultant” is engaged in providing to Consultancy Services to Public Sector, Private Sector and Multinational Companies for Formation of Gratuity Trust/Fund as per provisions of the Part C of Fourth Schedule of Income Tax Act 1961 and related Services (i.e. Actuarial Valuation, Compulsory Gratuity Insurance, Gratuity Trust Management etc.)

The most important tax benefit available to Companies of such Gratuity Trust/Fund is available under Section 36 (1) (v) of the Income Tax Act 1961, which is not available to Companies when provision of Gratuity Liability is made in the Balance Sheet (Refer Section 47A (7) of Income Tax Act 1961). The details of Consultancy Services offered by us are as under: -

1. Formation of a New Approved Irrevocable Gratuity Trust,

2. Regularization of Old Gratuity Trust or Group Gratuity Scheme, Surrender of Fund,

3. Vetting of Board Resolutions, Trust Deed, Trust Rules & Application for Approval from CIT,

4. 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: -

                              a. Change in Name of Trust,

                              b. Change in Address of Trust,

                              c. Change in Trustees,

                              d. Change in Investment 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. Approvals for winding up of Trust due to winding up of the Company

                              j. Approvals for Transfer of Fund in Event of Merger or Demerger

5. Advisory for Process, Advantages & Disadvantages for Formation of Gratuity Trust

6. Advisory for Formation/Restructuring of Gratuity Policy as per Social Security Code, 2020

7. Consultation about Statutory compliances of The Payment of Gratuity Act, 1972 as per Accounting Standards – 15 (Revised 2005) & IndAS19

8. Advisory for Accounting & Compulsory Gratuity Insurance Options for Compliance of The Payment of Gratuity Act, 1972 & *Chapter V-Gratuity of Social Security Code, 2020 (*Date for Implementation yet to be notified)

We have a Team of following Consultants with Decades of Experiences in their field and present Major Cities of India for execution of the assignments in timelines stipulated by our client:-

Ø  Legal Consultants - For Legal Issues involved in Formation of Gratuity Trust

Ø  Taxation Consultants - For Accounting Related Issues of Gratuity Trust

Ø  Income Tax Consultants - For Documentation of CIT Approval of Gratuity Trust.

Ø  Investment Consultants - For Gratuity Trust Money Investment Advisory.

Ø  Actuarial Valuation Consultants - For Actuarial Valuation Reports/Certificates

Ø  Merchant Bankers Consultants – For Assets Value Certification for Investment of Gratuity Trust

 Other Related Services to Gratuity Trust Formation: - We also provide Services for preparation of Inputs for Preparation of Actuarial Valuation Reports/Certificates of Actuary required by Gratuity Trust of Indian, Multinational & NBFC Companies required in following events: -

(i). For Initial Funding Assessment of Gratuity and Leave Encashment Liability by Trustees,

(ii). For assessment of Accrued Liability for Gratuity and Leave Liability in following events: -

a. Transfer of Employees within a Group Company.

b. Amalgamation of 2 companies

c. Demerger of company

d. Winding of Company

(iii). For Annual Audit of Balance Sheets of Gratuity Trust as per Actuarial valuations Reports/Certificates are also required by Trustees for compliance of following Accounting Standards: -

a. For Compliance Para 120 (l) of AS 15 (Revised 2005)

b. For Full Compliance Para 120) of AS 15 (Revised 2005)

c. IndAS 19

d. IAS 19 (Revised 2011)

e. US-GAAP

In recent past we have provided our Online and offline Consultancy Services for Formation of New Trust and Matters related to Merger, Demerger, Transfer and Closure of Old Gratuity Trusts to our following clients: - 

a.  HIBIPL Employees Gratuity Trust

b.  IIRIPL Employees Gratuity Trust

c.  KDN Employees Gratuity Trust

d.  TNS Employees Gratuity Trust

f.  Piller Power India Pvt Ltd.

g.  Tally India Solution Pvt Ltd.

i.  Compact India Pvt. Ltd.

j.   NNE India Ltd

k.  Capsitech IT Services Pvt Ltd.

l.  Aditya Infotech

m.   Max Speciality Pvt Ltd

n.   Surya Roshni

o.  Sysmind Tech Pvt Ltd

p.   NABCONS Staff Group Gratuity Trust (NABARD Consultancy)

q.  Group of St. Xavier Schools

r.  Employees Gratuity Trust 

s.   Blaser Swisslube, 

t.   Ion Group Companies & more than 1100 clients spread in all Sectors of Indian Economy.    

In case of any query or clarification  you may send your requirements at tikaramchaudhary @ gratuitytrustfund.com  

Our Firm “Gratuity Trust Fund Consultant” is engaged in providing to Consultancy Services to Public Sector, Private Sector and Multinational Companies for Formation of Gratuity Trust/Fund as per provisions of the Part C of Fourth Schedule of Income Tax Act 1961 and related Services (i.e. Actuarial Valuation, Compulsory Gratuity Insurance, Gratuity Trust Management etc.)

The most important tax benefit available to Companies of such Gratuity Trust/Fund is available under Section 36 (1) (v) of the Income Tax Act 1961, which is not available to Companies when provision of Gratuity Liability is made in the Balance Sheet (Refer Section 47A (7) of Income Tax Act 1961). The details of Consultancy Services offered by us are as under: -

1. Formation of a New Approved Irrevocable Gratuity Trust,

2. Regularization of Old Gratuity Trust or Group Gratuity Scheme, Surrender of Fund,

3. Vetting of Board Resolutions, Trust Deed, Trust Rules & Application for Approval from CIT,

4. 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: -

                              a. Change in Name of Trust,

                              b. Change in Address of Trust,

                              c. Change in Trustees,

                              d. Change in Investment 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. Approvals for winding up of Trust due to winding up of the Company

                              j. Approvals for Transfer of Fund in Event of Merger or Demerger

5. Advisory for Process, Advantages & Disadvantages for Formation of Gratuity Trust

6. Advisory for Formation/Restructuring of Gratuity Policy as per Social Security Code, 2020

7. Consultation about Statutory compliances of The Payment of Gratuity Act, 1972 as per Accounting Standards – 15 (Revised 2005) & IndAS19

8. Advisory for Accounting & Compulsory Gratuity Insurance Options for Compliance of The Payment of Gratuity Act, 1972 & *Chapter V-Gratuity of Social Security Code, 2020 (*Date for Implementation yet to be notified)

We have a Team of following Consultants with Decades of Experiences in their field and present Major Cities of India for execution of the assignments in timelines stipulated by our client:-

Ø  Legal Consultants - For Legal Issues involved in Formation of Gratuity Trust

Ø  Taxation Consultants - For Accounting Related Issues of Gratuity Trust

Ø  Income Tax Consultants - For Documentation of CIT Approval of Gratuity Trust.

Ø  Investment Consultants - For Gratuity Trust Money Investment Advisory.

Ø  Actuarial Valuation Consultants - For Actuarial Valuation Reports/Certificates

Ø  Merchant Bankers Consultants – For Assets Value Certification for Investment of Gratuity Trust

 Other Related Services to Gratuity Trust Formation: - We also provide Services for preparation of Inputs for Preparation of Actuarial Valuation Reports/Certificates of Actuary required by Gratuity Trust of Indian, Multinational & NBFC Companies required in following events: -

(i). For Initial Funding Assessment of Gratuity and Leave Encashment Liability by Trustees,

(ii). For assessment of Accrued Liability for Gratuity and Leave Liability in following events: -

a. Transfer of Employees within a Group Company.

b. Amalgamation of 2 companies

c. Demerger of company

d. Winding of Company

(iii). For Annual Audit of Balance Sheets of Gratuity Trust as per Actuarial valuations Reports/Certificates are also required by Trustees for compliance of following Accounting Standards: -

a. For Compliance Para 120 (l) of AS 15 (Revised 2005)

b. For Full Compliance Para 120) of AS 15 (Revised 2005)

c. IndAS 19

d. IAS 19 (Revised 2011)

e. US-GAAP

In recent past we have provided our Online and offline Consultancy Services for Formation of New Trust and Matters related to Merger, Demerger, Transfer and Closure of Old Gratuity Trusts to our following clients: - 

a.  HIBIPL Employees Gratuity Trust

b.  IIRIPL Employees Gratuity Trust

c.  KDN Employees Gratuity Trust

d.  TNS Employees Gratuity Trust

f.  Piller Power India Pvt Ltd.

g.  Tally India Solution Pvt Ltd.

i.  Compact India Pvt. Ltd.

j.   NNE India Ltd

k.  Capsitech IT Services Pvt Ltd.

l.  Aditya Infotech

m.   Max Speciality Pvt Ltd

n.   Surya Roshni

o.  Sysmind Tech Pvt Ltd

p.   NABCONS Staff Group Gratuity Trust (NABARD Consultancy)

q.  Group of St. Xavier Schools

r.  HIBIPL Employees Gratuity Trust 

s.   Blaser Swisslube, 

t.   Ion Group Companies & more than 1100 clients spread in all Sectors of Indian Economy.    

In case of any query or clarification  you may send your requirements at tikaramchaudhary @ gratuitytrustfund.com  

In Indian context most reputed Indian and Multinational Companies can Save Tax up-to 32.50% by Forming a CIT Approved Gratuity Fund under Irrevocable Trust and Investing the Initial and Annual Contribution equivalent to provision of Gratuity Liability in Balance Sheet annually (Refer Section 36 (i) (v) and 10 (25) (iv)) and Section 10 (25)(iv), which is disallowed under Section 40 (a) (7) of the Income Tax Act, 1961. 

The below example may help you the understanding “What benefits are companies are not getting if they don’t create CIT Approved Gratuity Trust”:-

Scenario 1. If company does not have a CIT Approved Gratuity Fund under Irrevocable Trust

then 

If the Actuarial Valuation Liability of Company under Gratuity Plan is INR 10 Crore since company has not created any CIT Approved Gratuity fund under Irrevocable Trust then total provision of INR 10 Crore Gratuity Liability will be disallowed whilst Computing Net Income for Income Tax Computation of Company.

Scenario 2. If company has created a CIT Approved Gratuity Fund under Irrevocable Trust

then 

If company had Formed An Approved Gratuity Fund (i.e. As per Clause 5 of Section 2 of Income Tax Act 1961) under Irrevocable Trust (i.e. As per provisions of Clause (a) of Sub-Section 2 of Section 3 of Part C of Fourth Schedule the Income Tax Act, 1961) then company will Transfer INR 10 Crores Bank Account of CIT Approved Gratuity Trust and INR 10 Crore will be allowed as expense under Section 36 (1)(v) of The Income Tax Act 1961 and Interest Accrued on this 10 Crore Amount is also Tax Exempted under Section 10 (25) (iv) of The Income Tax Act 1961. (CIT Approval in terms of Rule 4 of Part C of of Fourth Schedule the Income Tax Act, 1961 is must requirement for taking this Tax Benefit)

For getting the above taxation benefits companies Form CIT Approved Gratuity Fund under Irrevocable Gratuity Trust as per provisions of following Rules/Regulations and Acts :

1.  Rule 98 to 111 of the IT Rules, 1962
2. Part C of Fourth Schedule of IT Act, 1961,
3. Indian Trust Act, 1882,
4. The Payment of Gratuity Act, 1972 (a)
5. The Payment of Gratuity Rules 1972
6. The Karnataka Compulsory Gratuity Insurance Rule, 2024
7. Telangana Compulsory Gratuity Insurance Rules 2016
8. Andhra Pradesh Compulsory Gratuity Insurance Rules, 2011
9. Accounting Standards 15 (Rev 2005) & IndAS19
10. APS 27 of the Institute of Actuaries of India

(Kindly refer to the relevant para's and Section of the above mentioned Act/Rules for understanding the process of Formation of approved Gratuity Fund under Irrevocable Trust.