Gratuity Provision in Small Companies

Dear All

can anyone explain how small companies invest gratuity provision amount each year. is it mandatorily needs to be invested or not

Gratuity provision is not mandatory. To safeguard it can be deposited every year in gratuity deposit account in LIC or SBI or open a separate account

Hi @Prabhakar

Gratuity Provision in books of accounts is mandatory.

But investing that amount is not mandatory. You can do so as per the Valuation by LIC or other players in market who issues Gratuity Trust policy


Agree with c0025 and Ankit. Gratuity provision is mandatory to safegaurd their funds for their employees for defined Benefits for future.

Advisable to keep this amount separately with LIC or SBI.

(a) a liability when an employee has provided service to a company in exchange for defined benefits to be paid in the future; and
(b) an expense when the company consumes the economic benefit arising from service provided by an employee in exchange for defined benefits.

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