We have a small shop and I was wondering to get a gratuity plan for some of them. How can I go about this?
Rekha Mittal, Pune
Most life insurers offer a gratuity plan and you could check with them in structuring one for your employees. Essentially, you will need to open a trust, which in turn would buy this plan. A gratuity plan is mandatory for a company to make a provision for gratuity but it is not mandatory for them to invest the provision in a gratuity plan and claim the entire amount as a business expense and reduce their tax liability. Coming back to the insurer offering the gratuity plan – they will evaluate your staff each year on how much future gratuity liability you need to go in for and suggest a plan accordingly. You would have an option to fund it altogether or in steps. You should know that the returns generated from the gratuity fund are tax-free, which you need to pay to the employee as and when they leave the company.
