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Gratuity Trust for IT company

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prakash

B.Com

133 Points Joined June 2015

Hello Experts,

In my previous Company ( Emplyee size was 1500 ) I got Gratuity credited even I have served less than 5 years as they were having some LIC Grautity Trust.

But in my curreent Employer (Emplyee size 45 Emplyee) they do not have type of Trust and they said I will get Gratuity after completing 5 years.

Now, If anyone can guide and I can advise to my current Employer about to formation of Gratuity Trust and if it really benifits to Employee and Employer.

Thank you in advance.

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8756 Points Joined December 2011

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.

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