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Audit of gratuity fund

Rakshita (Practicing CA) (26 Points)

07 March 2019

Hello all,

I have got a work of auditing the Gratuity fund of a company. The company invests its gratuity fund in another investment company and does not have its own trust. My question is whether such an audit can be done or not? if yes, how can i proceed with it?

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3 Replies

(Guest)

if you have allotted for audit of gratuity fund of a company then you can proceed for it .. only keep in mind regarding proper documentation of such audit which is related to such fund and also receive audit engagement letter from the company . if you get any adverse response then you can not accept it.

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 13 August 2019

Gratuity fund is a lump sum payment made by a company to the employee in time of his/her retirement. We perform audit on this fund where there is funded gratuity fund with a separate trustee board and a separate accounts is prepared to confirm if the client is adhering to its agreements.

Tikaram Chaudhary (Founder of Gratuity Trust Fund Consultant) (2187 Points)
Replied 13 February 2024

Karnataka Government becomes the 3RD State to notify the requirement of Compulsory Gratuity Insurance for fulfillment of provisions of following :-

1. Sub-Section (2) & (4) of Section 4A of The Payment of Gratuity Act, 1972,

2. Subsection (5) of Section 2 Income Tax Act 1961,

3. Part C of Fourth Schedule of Income Tax Act, 1961

4. Rule 98-111 of Income Tax Rule, 1962

5. Chapter II of Indian Trust Act, 1882

6. AS 15 (Revised 2005) & IndAS 19

7. Insurance Act, 1938

The Government of Karnataka has notified above notification to ensure that there will be no default in terms of Payment of Gratuity to Private Sector employees even in case of Bankruptcy of Company as this notification specified that “Employer shall at all times maintain the gratuity trust and gratuity fund, as an Irrevocable System”

The gazetted notification is attached herewith for your kind perusal.

The Karnataka Government has notified the above Rules called “Karnataka Compulsory Gratuity Insurance Rules, 2024 (hereinafter referred as KCGIR, 2024)” on 10th January 2024. The last date for completion of compliance of KCGIR, 2024 is 09.03.2024 (i.e. 60 Days after date of notification).

Our firm GTFC - Gratuity Trust Fund Consultant has provided the end to end Consultation Services to more than 1000 Indian and Multinational Companies spread in PAN India in all Sectors of Indian Economy for Formation of Approved Gratuity Fund under Irrevocable Trust and mandatory requirements for employers to obtain insurance for the payment of gratuity to eligible employees and ensure compliance with the provisions of the Payment of Gratuity Act, 1972.

Our Consultation Services covers all the aspects (i.e. Legal, Actuarial, Insurance, Investment and Accounting) of getting the Valid Insurance within the stipulated timeline for implementation of Karnataka Compulsory Gratuity Insurance Rules, 2024. Our consultation covers:-

1. Consultation for Assessment for Applicability of KCGIR, 2024 on the establishment,

2. Consultation for Actuarial Valuation for Assessment of Gratuity Liability as per AS 15 (Revised 2005)/IndAS 19 for Initial Contribution and Annual Compliance in Balance Sheet,

3. Consultation for Formation Approved Gratuity Fund under Irrevocable system as prescribed in the KCGIR, 2024,

4. Liaison with the Leading Insurance Companies for getting the Valid Insurance like :-

a. Life Insurance Corporation of India (LIC)

b. SBI Life Insurance Company Limited

c. Pramerica Life Insurance Limited

d. Bajaj Allianz Life Insurance Co. Ltd

e. ICICI Prudential Life Insurance Company Limited

5. Consultation for Registration of Gratuity Trust in sub-registrar office and thereafter Registration of Establishment in Form I or FORM II as prescribed in KCGIR, 2024,

6. Consultation for Vetting Deed of Variations for Change in no of Trustee required by companies with Existing Approved Gratuity Fund under Irrevocable Trusts,

7. Consultation for Vetting of Application prescribed u/s Rule 109 of Income Tax Rule 1962 & Documents to obtain the CIT Approval as per provisions of Part C of Fourth Schedule of Income Tax Act, 1961,

For more details in the matter or any requirement for formation of the Gratuity Trust, you may connect us at tikaramchaudhary @ gratuitytrustfund.com