Ind AS 19 Discount Rate Reference — 30 March 2026

For actuarial valuation under Ind AS 19 and AS 15, the discount rate must reflect yields on high-quality corporate bonds of duration consistent with the benefit obligation. In India, Government Securities (G-Sec) yields serve as the reference in the absence of a sufficiently deep corporate bond market. The data below is sourced from FBIL (Financial Benchmarks India Pvt. Ltd.) G-Sec prices and yields as at 30 March 2026.

FBIL G-Sec Yield Curve — 30 March 2026

The chart below shows the full yield curve derived from FBIL data. For actuarial purposes, the relevant range is 1–15 years, corresponding to the typical duration of Indian employee benefit obligations.

Reference Yields at Standard Actuarial Tenors

The following table presents interpolated yields at round-year tenors derived from the FBIL G-Sec data. These are reference rates; the appropriate discount rate for your specific scheme will depend on the Modified Duration of your benefit obligation, as computed by your actuary.

Source: FBIL Fixed Interest Securities G-Sec Prices/Yields, 30 March 2026. YTMs interpolated at round-year tenors from observed bond yields. Semi-annual compounding basis.

How Is the Appropriate Rate Selected?

The actuary computes the Modified Duration of your benefit obligation using the Projected Unit Credit (PUC) method — this is the weighted average time until each unit of benefit is paid, discounted at the current rate. The yield corresponding to that duration is selected from the G-Sec curve.

For most Indian companies, the duration of the gratuity obligation falls between 5 and 10 years. Leave encashment tends to have shorter duration (2–5 years). Pension and PRMB obligations can have durations exceeding 12 years.

Sensitivity Disclosure (Ind AS 19 Para 145)

Ind AS 19 requires companies to disclose the sensitivity of the DBO to changes in significant actuarial assumptions. At the 7-year point (7.09%), a ±50 basis point change in discount rate produces approximately:

New Labour Codes: Impact on Gratuity and Leave Valuations

The four Labour Codes became effective on 21 November 2025. For companies preparing Ind AS 19 or AS 15 valuations, the most consequential change is the redefinition of "wages" under the Code on Wages — which directly determines the gratuity and leave encashment computation base.

The Old Definition (Pre-November 2025)

Under the legacy Payment of Gratuity Act, 1972, "wages" for gratuity computation meant basic salary plus dearness allowance only. Many companies structured compensation with a deliberately low basic to reduce the gratuity base — a common practice that the new Codes expressly address.

The New Unified Wage Definition

The Code on Wages defines wages to include all remuneration paid, subject to specific exclusions. Critically, those exclusions are subject to a 50% cap: if the total of excluded components (HRA, bonus, PF, gratuity, overtime, etc.) exceeds 50% of total remuneration, the excess is classified as wages. This sets an effective floor — wages must equal at least 50% of CTC.

Impact on Actuarial Liability

• DBO increases as the projected gratuity at retirement is higher
• Current Service Cost increases — each year of service accrues a larger unit of benefit
• Past Service Cost arises as a one-time P&L charge for the increase in benefits on existing service
• Salary escalation assumption requires review — broader base changes the sensitivity

Effective Date and Accounting Treatment

The change applies from 21 November 2025. For March 2026 year-ends, the actuarial valuation must reflect the new wage base. Past service cost arising from the change in benefit terms is recognised immediately in profit or loss under Ind AS 19 — it cannot be deferred or amortised.

Action Steps

• Map your payroll data to identify employees where wages fall below 50% of CTC
• Engage your actuary early — before the audit commences — to quantify the past service cost
• Brief your auditor on the one-time P&L charge and its basis
• Review your gratuity trust funding level in light of the higher liability

AS 15 vs Ind AS 19 — What Is the Difference?

Every company preparing financial statements in India must obtain an independent actuarial valuation under either AS 15 (Revised 2005) or Ind AS 19. Both require the same core computation, but differ in how gains and losses are recognised and in disclosure depth. Knowing which applies to your company is the essential first step.

Which Standard Applies?

Key Differences

The Most Important Difference: OCI Treatment

Under AS 15, actuarial gains and losses can be recognised in profit and loss or spread using the corridor method. Under Ind AS 19, all remeasurements are recognised immediately in OCI and never recycled to P&L. This means Ind AS companies see volatility in OCI each year, while P&L shows a smoother service cost and net interest cost — but the balance sheet always reflects the full actuarial liability.