GOVERNMENT OF KARNATAKA
No: LD 397 LET 2023

Karnataka Government Secretariat, Vikasa Soudha, Bangalore, dated: 10/01/2024

NOTIFICATION
In exercise of the powers conferred by sub-section (4) of Section 4A of the Payment of Gratuity Act, 1972 (Central Act No. 39 of 1972), the Government of Karnataka hereby makes the following rules, namely;-

Rules

1. Title and Commencement.- (1) These rules may be called the Karnataka Compulsory Gratuity Insurance Rules, 2024.
(2) They shall come into force from the date of their publication in the Official Gazette.

2. Definition

(1) In these rules unless the context otherwise requires,-
(a) “Act” means the Payment of Gratuity Act, 1972 (Central Act No. 39 of 1972);
(b) “employer” means an employer other than employer of an establishment belonging to or under the control of Central Government or State Government;
(c) “form” means a form appended to these rules;
(d) “nomination” means nomination made under section 6 of the Act; and
(e) “section” means a section of the Act.

(2) The words and expressions used and not defined in these rules but defined in the Insurance Act, 1938 (Central Act No. 4 of 1938), Life Insurance Corporation Act, 1956 (Central Act No. 31 of 1956) the General Insurance Business (Nationalization) Act, 1972 (Central Act No. 57 of 1972), the Insurance Regulatory and Development Authority Act, 1999 (Central Act No. 41 of 1999), the Payment of Gratuity Act, 1972 (Central Act No. 39 of 1972) and the Payment of Gratuity (Karnataka) Rules, 1973 shall have the same meanings respectively assigned to them in the said Acts.

3. Obtaining Insurance for Payment of Gratuity.- (1) Every new employer shall subject to fulfillment of sub-section (2) of Section 4A of the Act, within a period of thirty days from the date on which these rules becomes applicable to such establishment shall obtain valid insurance policy in the manner as prescribed under sub-section (4) of Section 4A of the Act for his liability for payment towards the gratuity to all eligible employees under the Act from the Life Insurance Corporation of India or any other insurance company incorporated in accordance with the provisions of the Insurance Act,1938(Central Act No. 4 of 1938), the Companies Act, 2013 (Central Act No. 18 of 2013), the Insurance Regulatory and Development Authority of India Act,1999 (Central Act No. 41 of 1999) or any other law which is applicable to the insurance company in this regard.
(2) The employer of an establishment which is in existence at the time of commencement of these rules shall obtain valid insurance policy within sixty days from the date of commencement of these rules.
(3) The employer of the establishment who has obtained valid insurance policy shall make all payments by way of premium to the insurance company and renew the same periodically and intimate the same to the Controlling Authority within fifteen days from the date of renewal of the policy. The employer shall initiate the process of payment of premium and renewal of policy before the lapse of the
policy.
(4) Every employer shall exercise all due diligence for on-time payment of the premium and renewal of the policy.

4. Recovery of the amount of Gratuity.-
The Controlling Authority appointed under section 3 of the Act or any other officer notified for the purpose of implementation of these rules by the State Government, is authorised to recover the amount of the Gratuity payable to an employee, as determined by the employer under sub-section (2) of section 7 of the Act, or in case of a dispute as decided by the Controlling Authority under sub-section (4) of section 7 of the Act, from the Life Insurance Corporation of India or any other insurance company with whom an insurance has been taken under sub rule (1) of the rule 3.

5. Registration of the Establishment.-
(1) Every employer shall submit an application in Form-I to get his establishment registered with the Controlling Authority of the area or any other officer notified for this purpose by the State Government within thirty days from the date of obtaining insurance along with the list of its employees insured.
(2) Every employer shall furnish the details of the employees insured, to the Controlling Authority or any other officer notified for this purpose by the State Government in Form-III at the time of registration of the establishment and thereafter whenever there is a change in the employees insured or policies or any other pertinent information.
(3) The Controlling Authority on receipt of an application under sub rule (1) shall immediately take action for registration of the establishment in Form-IV.

6. Continuation of Approved Gratuity Fund.-
Every employer of an establishment who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement and every employer employing five hundred or more persons who establishes an approved gratuity fund may opt to continue or adopt such arrangement by submitting an application in Form II, provided such existing approved gratuity fund covers the entire liability of all the employees of the establishment under the provisions of the Act.

7. Incorporation of Gratuity Trust.-
(1) Every employer of an establishment who had duly established an Approved Gratuity Fund in respect of his employees and who desires to continue such arrangement and every employer employing five hundred or more persons who establishes an Approved Gratuity Fund shall register the Gratuity Trust with five but not equal number of representatives of the employer and employees with the registration authority notified under the provisions of the Indian Trust Act, 1882 (Central Act No.02 of 1882) or any other applicable law and thereupon take steps for compliance of provisions of the Act the Income Tax Act,1961 (Central Act No.43 of 1961) and any other law which is in force.
(2) The gratuity trust shall be managed privately or by the insurance company or jointly by paying the calculated amount to the approved gratuity trust fund periodically by the employer;
Provided that in case of privately managed gratuity trust investment of funds shall be done as per the provisions of the Income Tax Act, 1961 (Central Act No. 43 of 1961) by the Board of trustees and entire administration of the gratuity trust including actual valuation shall be the responsibility of the Board of trustees. In case of group gratuity scheme being marketed by the insurance companies the employer shall obtain group gratuity scheme which has approval under part-C of the fourth schedule of the Income Tax Act, 1961(Central Act No.43 of 1961) by the competent authority.
(3) The gratuity trust shall maintain separate gratuity fund. The inflow of contributions to the gratuity fund shall be contributory from the employer and noncontributory for the employees. The out-flow of the gratuity fund shall be only to the eligible employees at the time of their exit from service. The gratuity fund is totally protected fund and money shall not be withdrawn neither by the employer nor by the gratuity trust under any circumstances for any other purpose other than for the payment of gratuity to the eligible employees.
(4) The bye-law of the gratuity trust shall contain detailed procedures including performance for claiming and releasing of the calculated amount of gratuity to each of the eligible employees on their exit from the service.
(5) The gratuity trust shall adhere to the Indian Accounting Standards 15 (Employee Benefits) and any law applicable to the trust.
(6) The Board of trustees of the gratuity trust at the time of exit of an employee shall duly send discharge letter and advise Insurance Company or make arrangement of payment of gratuity as per the scheme.
(7) The employer gratuity trust and the insurance company are jointly and severally responsible for fulfillment of their liabilities under the Act.
(8) The employer shall at all times maintain the gratuity trust and gratuity fund, as an irrevocable system.

8. Compliance with the provisions of the Act.-
Every employer of the establishment to whom these rules apply shall take all measures to fulfill his obligations under the provisions of the Act.

By Order and in the name of the
Governor of Karnataka,
(Suma. S)
Under Secretary to Government,
Labour Department

FORM – 1
APPLICATION FOR REGISTRATION OF AN ESTABLISHMENT
[see rule 5(1)]

FORM – II
OPTION TO CONTINUE UNDER THE EXISTING INSURANCE SCHEME
[see rule 6]

FORM – III
DETAILS OF EMPLOYEES OF THE ESTABLISHMENT COVERED UNDER COMPULSORY INSURANCE
[see rule 5(2)]

FORM – IV
GOVERNMENT OF KARNATAKA DEPARTMENT OF LABOUR
REGISTER OF ESTABLISHMENT UNDER COMPULSORY INSURANCE
[see rule 5(3)]