The Karnataka Compulsory Gratuity Insurance Rules, 2024 have made it mandatory for all employers in the state to either:
Obtain a gratuity insurance policy, or
Set up an approved gratuity trust.
Existing organizations must comply within 60 days of notification (by March 10, 2024), while new employers have 30 days from applicability.
Two Compliance Routes: Trust and Non-Trust
Trust Route: Employers can set up an irrevocable Gratuity Trust, registered under the Indian Trusts Act, 1882 and Income Tax Act, 1961. The trust must have at least five trustees, and can manage gratuity funds internally or through an insurer. Contributions to the trust are tax-deductible.
Non-Trust Route: Employers may take direct gratuity insurance without setting up a trust, but should seek tax advice on the extent of deductions available under this route.
While Karnataka leads the way, similar provisions exist in Andhra Pradesh, and other states like Tamil Nadu, Maharashtra, Gujarat, and Delhi NCR may soon follow. The upcoming Social Security Code is also expected to bring national-level alignment.
For HR professionals, this is not just a compliance step — it’s an opportunity to strengthen employee trust, financial planning, and tax efficiency through structured gratuity funding.
At OmniKavvach Insurance Brokers, we help organizations with:
Gratuity insurance setup and advisory
Assistance in obtaining professional support for creating and managing gratuity trusts
Assistance in obtaining professional support Compliance and regulatory support, actuarial valuation
Policy selection and insurer evaluation
End-to-end HR and benefits administration support
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