LIC Group Gratuity Scheme
What is the nature of this scheme?
LIC Group Gratuity Scheme which is also called as Cash Accumulation Scheme is a plan which is launched under the Payment of Gratuity Act to provide a convenient mode to fund the statutory obligation of an employer. It helps the employer to carry their obligation to a higher level.
According to The Payment of Gratuity Act, 1972, the employer has to pay about 15 days salary which is equivalent to 15/26 of a month's wages, to its each and every employee for every successful year's service, if they exit after their continuous five years of service on any reason, with the maximum limit of up to 3.5 lacs.
If the employer desires, even higher benefits can also be provided. When liability arises, as per the LIC Group Gratuity Scheme gratuity can be paid to the employees, which could be claimed under the P & L account as the deductible expense.
What are the attractive returns of this scheme?
The following are the attractive returns that are available under this LIC Group Gratuity Scheme. Depending on the size of the fund, a very attractive rate of interest would be offered by the LIC. As per the Section 36(1) (v), the ordinary annual contribution that is made by the employers is treated as deduction in the business income computation.
When we consider the initial contribution that is made by the employer, according to the Rule 104 there is no limit made on the amount. The date on which the funds are set up, the initial amount has to be paid either in full or equally divided 5 year installments.
Also, under this LIC Group Gratuity Scheme, according to the Rule 104, the permitted deductions should not cross 8 1/3% of the past salaries.