1. LIC Gratuity Scheme
Objective: Systematic funding of gratuity liability with compliance to various legal and accounting
provisions (as per income tax act, payment of gratuity act and accounting standards 15). Optimum tax
benefits with best guarantee, returns and liquidity of funds.
Methodof operation:Everyyearan actuarial valuationwill be conductedbased on the employee
data and the liabilitywillbe determined.Companywillmake contributions to the scheme based on this
liabilityandasand when the employeegoesout,the settlement will be done from this fund as per the
directions of the company. So long as the fund continues, it will earn competitive tax free returns
Why LIC:
 This being a long term arrangement, consistency of returns on contribution is highly relevant.
LIC has offered the best consistent rates (over 9%) for years together.
 SovereignguaranteebyGovt.of India on the funds and interest declared is available only with
LIC
 LIC schemes are approved by income tax department and hence tax efficient
 Wide network, size and accessibility of LIC helps in easy liquidity and access
 In India, more than 80% of the Gratuity schemes are handled by LIC
 Economies of Scale reflecting in liquidity, returns and safety to the funds
Benefits to Employer Benefits to Employees
Lesser contribution than the actual liability. The Actual
liability will be Past service *15/26*Salary. But the
contribution required will be considerably less than this.
Tax free gratuity. The gratuity received at the
handsof employeeistax free asperpaymentof
gratuity Act 1972.
Income Tax benefits @ corporate tax rate. Contributions
treated as current business expenditure ( sec 36 (1))
Risk coverage.Givesfuture service gratuityalso
to the employees.
Systematic funding of Gratuity. This liability grows along
with service and salary. In due course this may become
very huge. But the scheme helps to keep you out of worry
about this liability through periodic systematic funding.
Timely payment. Payment on the same day of
retirement through employer since there is no
liquidity issues.
Competitive earnings to fund. The fund earns around 9%
on a dailybasis.There isprovenconsistencytothisandalso
sovereign guarantee in case of LIC
Employee Welfare bywayof certainprovisions
and additional benefit in case of risk.
Compliance to accounting standards AS 15. The actuarial
valuation and funding is a must as per AS15 and the
scheme ensures that compliance.