Gratuity Fund has to be created by a deed and registered for management of funds

and authority:
1. Opening of Gratuity Fund account with a Nationalized Bank.
2. Valuation done by Authorized Actuary : If you furnish a statement of Employee
s with their date of Birth, Date of Joining, their monthly Salary details and pr
ovide a column for the Actuary to fill in the gratuity accrued to them as per Gr
atuity act.
3. Now before the companies year end accounts, you have to provide the provision
of Gratuity in the books of accounts, and before its due date that money should
be Deposited into the Gratuity Fund account you maintain with a Nationalized Ba
nks.
4. Now from next year, every year you will send the statement before the year en
d and get the valuation done. So the Total Gratuity Provision as per the new Sta
tement you will see how much has been already created and you will now provide t
he difference and transfer the Funds to Gratuity Fund account. Say previous year
valuation shows Rs.1,85,000/- and new valuation shows Rs.2,25,000/- then the di
fference of Rs.40,000/- will be current year Gratuity Provision you have to pay
into the Current Account of Gratuity Fund Account with the Nationalized Bank. Un
less this money is paid before the due date Income Tax will not allow this as a
deduction. So Payment of money into the Gratuity Fund account with proof is mand
atory.
NOW COME TO HOW TO MANAGE THE GRATUITY FUND ACCOUNT:
There is a statutory Provision for Investment of Gratuity Fund money in Authoriz
ed Secutiies. This you will get a copy from Actuary also. They will guide you.
1. Invest this amount in the manner of (%) prescribed by the act and rules of Gr
atuity Act.
They will say 40% in Central or State Govt. Secutiies.
Another in other forms of Security; 40% in special Account with the Nationalized
Bank itself as per Gratuity Act.
Balance in Current Account say 20%
to make the 100%.
You have to check if the Listed Investments are Authorized under the
Gratuity and eligible Securies. Otherwise it is not an authorised investment und
er the Gratuity Act and Rules.
You have to manage the Funds:
If an employee leaves the organization:
You will calculate the amount as per Gratuity Payment Rules. This is nothing to
do with the amount of Actuary Valuation done by the Actuary. Actuarial Valuation
is only a provision under the act for payment funds from company account to Gra
tuity Fund Account. This cannot be reversed.
Now you will calculate the amount due to the Employee Rs...........
Now you will look for the amount in the Current Account Rs..............
If this amount is sufficient to pay to the Employee then you will give a check f
or the amount due to him, and take a Payment Voucher under XYZ COMPANY LTD.-GRAT
UITY FUND ACCOUNT
If suppose there is shortage of Funds then you first transfer some amount from c
ompany account to Gratuity Fund and then pay the due amount to the Employee.
At the year end, you will remove the employees name from list altogether. No nee
d to show his name at all.
Thereby the new provision will be available from the Actuary:
At the year end:Then now look into your as of date: (what is actually available)
List of Investments: Rs...............
Add:Interest Received Rs................
Balance in the GF-Current Account Rs...............
Total of all the above.Rs................
New Provision as per list Rs..............
The difference will be now further transferred to Gratuity Fund Account.
LIKE COMPANIES ACCOUNTS ARE AUDITED, AUDIT OF GRATUITY FUND ACCOUNT IS ALSO TO B
E DONE AND AUDIT CERTIFICATE IS TO BE OBTAINED.
GRATUITY FUND IS AN INDEPENDENT ENTITY AND
EVERY ACTION, INVESETMENT ETC. ARE TO MINITED IN THE MINUTES OF MEETING OF TRUST
EES OF FUND AND RESOLUTION IS TO BE PASSED.
AUTHORIZED SIGNATORIES FOR INVESTMENT, AND BANK ACCOUNTS ARE TO BE MADE WITH ANY
TWO THE TRUSTEES WILL SIGN THE DOCUMENTS AND OPERATE THE BANK ACCOUNTS AND INVE
STMENT FUNDS.
PAYMENT TO EMPLOYEE IS ALSO BE RESOLVED IN THE MEETING AND COPY KEPT IN RECORDS
WITH PROPER SIGNATORY OF TRUSTEES.
The main issue is Gratuity Fund is seperate account and this funds cannot be mis
ued.
Close monitoring of the Investments and getting the interest warrants and follow
if not received.
Change in Trustees due to retirement, death and other reasons to be minuted and
change of authorized Trustees to be circulated and recorded for all investments
wherever necessary.