Page 168 - Group Insurance and Retirement Benefit IC 83 E- Book

Besides the above said advantages, the scheme also provides for employee welfare

measures with built in insurance cover.

Insurance cover for future service gratuity
Another salient feature of the Gratuity Scheme with LIC is that it provides for insurance

coverage to the employees to the tune of future service gratuity subject to certain limits.
The insurance cover can be flexible depending on the requirements of the Trust. The

Group Insurance premium will be commensurate to the cover provided.

Income Tax Benefit on Insurance Premium

The insurance premium paid towards the above said benefits is treated as deductible

business expenses to the company.

The premium is not treated as perks in the hands of the employees
The main provisions of the Act in 1972 were as follows:

1. All the establishments in which 10 or more employees are employed are covered under
the Act.

2. Employees drawing a salary(Basic+DA) of less than Rs. 1000 per month only were

covered under the Act.
3. 15 days salary(Basic+DA) for each year of service was to be paid as gratuity at the

time of exit by resignation, death or retirement.
4. In case of resignation a completed service of 5 years was required for the eligibility.

5. A maximum of 20 months salary and a monetary limit of 30000 were fixed as the
ceiling.

Gradually the ceiling on salary for eligibility was raised periodically to Rs. 1600, 2500,
3500 and then removed. The ceiling on gratuity was raised periodically to Rs. 36000,

50000, 100000, 250000, 350000 and now stands at Rs.1000000 (with effect from

24.05.2010). The 20 months salary ceiling on gratuity was removed.