Provision for Gratuity..?

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VIJAY (Querist)
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02 May 2009 Dear experts,

'ABC' company has started their business in FY 07-08. Now FY 08-09 is the company's second Financial Year.

Now the company is closing their books for FY 08-09 (Finalization). And they want to make a provision for Gratuity. (Company wants to Introduce Gratuity.)

Questions:
1. What is the applicability for gratuity?
2. How does it work?
3. What is the procedure?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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02 May 2009 Gratuity is compulsory for a company which has completed 5 years. But if your company wishes to provide for the same they can do so.

As at the date of Balance sheet you have to claculate the gratuity payable to each employee as if he will leave the company on that day. Then provide for the same.

A matiching investment has to be made and every year you have revise the same. And you have to follow accounting standard - 15 accounting for retirement benefits in the financial statements of employers.

VIJAY

VIJAY (Querist)
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04 May 2009 Thanks Sir.!!

ABC Company didn't complete their 5 years, Hence Gratuity won't be applicable or Mandatory. is it.?

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