Gratuity in India is a much looked forward to retirement fund. Even if you are changing jobs after five years of continuous service, you are entitled to gratuity which can be a decent sum of money to start off your investments.
Employees tend to be confused when it comes to calculating the sum of money they would receive and furthermore on how they can invest it. When looking for a guide on this, you can always look up gratuity calculator applicable to the Indian context.
Using an Online Calculator
For using the Online Gratuity Calculator India, you need to understand a few facts on how gratuity is calculated. The basic formula for calculating gratuity is as follows –
Gratuity= (1/4)*(Basic Salary + Dearness Allowance) * No. of 6 monthly periods completed. In essence, it is 16 times the basic pay.
However, you first have to check these elements in your salary slip –
- Basic salary
- Dearness allowance
- Number of years in service
You have to know that one of these formulas will apply to you –
Formula 1 – This is applied when you are part of an organization which falls under the Gratuity Act.
Gratuity = Previous salary before leaving x (15/26) x Total no. of years worked
Formula 2 – This is applicable if you work in an organisation which does not require adherence to the law but you are paid gratuity.
Gratuity = Previous salary before leaving x (15/30) x Total no. of years worked
When calculating gratuity online, you have to know which formula is applicable in your context. If dearness allowance, incentives or such variable pay is a part of your monthly salary, it needs to be removed for this calculation. The last drawn salary should include your basic pay and other fixed components after removing the variable.
Taxation on Gratuity
The amount received as gratuity is tax-free and is not included in your taxable income. The highest tax-free gratuity you can receive is Rs. 20 lakhs. However, if your contract states that you can exceed this limit as a term of meaningful employment, then you will receive additional gratuity but it will be termed as ex-gratia.
Investment Plan for Gratuity Amount
Once you receive your gratuity amount, you should look for a suitable – high paying and safe investment plan for it. Most people simply park it in a bank FD without considering the interest rate scenario which is on the lower side. The interest rates in India are falling owing to excessive liquidity in the system. Company FDs give 1-2% higher interest rates than bank FDs. The table below lists Bajaj Finance FD interest rates for various tenors.
| Tenor in Months | Minimum deposit (in Rs.) | Cumulative | Non-Cumulative | |||
| Monthly | Quarterly | Half-yearly | Annual | |||
| 12 – 23 | 25,000 | 8.00% | 7.72% | 7.77% | 7.85% | 8.00% |
| 24 – 35 | 8.15% | 7.88% | 7.93% | 8.00% | 8.15% | |
| 36 | 8.60% | 8.28% | 8.34% | 8.42% | 8.60% | |
| Special Tenors Scheme | ||||||
| 15 Months | 1,00,000 | 8.05% | 7.77% | 7.82% | 7.89% | 8.05% |
The lowest interest rate available with Bajaj Finance FD is 7.72% to 8% for a tenor of 12 to 23 months. This increases with the tenor. At 3 years you can easily earn 8.6% for the cumulative option. Also, a special rate of 8.05% is available for a 15-month tenor. Bajaj Finance FD offers one of the best rates with an assurance of guaranteed returns on your hard-earned gratuity money.
Splitting Gratuity Amount into Multiple FDs
You can ladder your investment by splitting your gratuity money and creating a stream of multiple FDs which will mature at periodic intervals in the future depending on the tenors you choose. A continuous flow of returns is created for the next few years which you can auto-renew. There are additional new features with Bajaj Finance FD such as debit card facility to book an FD and multi-deposits through single payment wherein you can break the gratuity amount to create multiple FDs.
Fixed Deposits – An Ideal Investment for Multiplying Gratuity Money
Once you receive the gratuity amount, you can invest it in a high-paying company FD, such as Bajaj Finance FD where you can easily earn 8.95% if you are a senior citizen. Use the online FD Interest Calculator India to see the maturity amount and you can tweak the tenor to avail the best returns possible. You can go for a special tenor of 15 months or create different FDs with lump sum payments to ensure a continuous stream of returns. These FDs are highly liquid. Therefore, it is easy to liquidate them when you are in need of urgent cash. Alternatively, you can even raise a loan against FD.
These deposits are highly stable as they are certified with CRISIL and ICRA ratings. Hence, you can be assured of high returns on your hard-earned gratuity money with Bajaj Finance FD.
Gratuity is very beneficial to employees and it should be promoted widely
Thanks for sharing. It is a really helpful article!