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Gratuity Valuation — Actuarial Certificate under AS 15 & Ind AS 19

Every company with 10 or more employees must provide gratuity. Every company preparing financial statements under AS 15 or Ind AS 19 must obtain an independent actuarial valuation. Kapadia & Kochrekar delivers audit-ready gratuity valuation reports within 72 hours.

Gratuity is a statutory benefit payable to employees upon completing five or more years of continuous service, governed by the Payment of Gratuity Act, 1972 (now subsumed under the Code on Social Security, 2020). For accounting purposes, the gratuity obligation is a defined benefit liability that must be measured using the Projected Unit Credit (PUC) actuarial method under AS 15 or Ind AS 19.

The actuarial valuation determines the present value of the future gratuity payments the employer is obligated to make — discounted at the current Government Securities yield curve — and quantifies the components needed for your financial statements and audit.

Who Requires a Gratuity Valuation?

Company Type Applicable Standard Requirement
Listed companies, net worth ≥ ₹250 crore Ind AS 19 Mandatory — actuarial valuation required
Subsidiaries / associates of Ind AS companies Ind AS 19 Mandatory
Unlisted, net worth < ₹250 crore AS 15 (Revised) Mandatory — actuarial valuation required
Companies with ≥ 10 employees Either Gratuity must be provided; liability must be valued
Companies with a funded gratuity trust / LIC policy Either Separate actuarial valuation still required
Important: A funded gratuity scheme — whether managed through an insurer's/LIC Group Gratuity policy or a self-managed trust — does not eliminate the requirement for an independent actuarial valuation. The fund value and the actuarial liability are separate; the net position must be disclosed.

What the Valuation Covers

Key Actuarial Assumptions

Assumption Basis Typical Range (India)
Discount rate G-Sec yield (FBIL) at Modified Duration of obligation 5.90% – 7.49% (March 2026)
Salary escalation Company's best estimate; industry benchmarks 5% – 12% p.a.
Attrition / withdrawal Company's historical experience by age/service band 2% – 30% p.a.
Mortality IAI Indian Assured Lives Mortality Tables (2012-14) Standard
Retirement age Per employment contract / policy 58 – 65 years

What You Receive

Data Required from You

72-hour SLA: Kapadia & Kochrekar delivers the completed actuarial report within 72 hours of receiving complete and clean employee data. For large or complex schemes, timelines are discussed at engagement.

Frequently Asked Questions

Yes. A funded gratuity plan reduces the net liability but does not eliminate the actuarial valuation requirement. Under AS 15 and Ind AS 19, you must disclose both the gross DBO and the fair value of plan assets, along with the full actuarial assumptions and movements. The insurance policy is the plan asset; the actuarial report determines the DBO.
The Code on Wages (effective November 21, 2025) introduces a 50% cap on allowance exclusions, effectively raising the wage base for companies where eligible salary is below 50% of total remunaration. This increases the DBO and creates a one-time past service cost that must be recognised immediately in P&L under Ind AS 19. See our detailed article on this topic.
The discount rate is based on the FBIL G-Sec yield at the Modified Duration of your specific obligation — typically 6.80%–7.50% for a most plans at March 2026. The exact rate is computed by your actuary as part of the valuation. See our Ind AS 19 Discount Rate article for reference yields.
Yes, where the applicable standards are aligned. For Indian GAAP (AS 15) statutory purposes and group consolidation under IFRS or US GAAP (IAS 19 / ASC 715), the valuation methodology is the same (PUC method) but the assumptions and disclosures may differ. We provide multi-standard reports where required.
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