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Gratuity is a defined contribution benefit mandated by the Employee Provident Fund Organization (EPFO) which records and administers this benefit for millions of blue-collared and white-collared workers in India. This is a social retirement plan to include all organisation with at least 10 employees to pay a lumpsum amount to its employees on retirement. This is meant as a reward for the long service to the company and a superannuation benefit. 

If you were to use the gratuity calculator for India , you will never be able to match the amount which you expect it to be. This is because there are two formulae used for gratuity calculation, and only one is applicable to you, depending upon the company you work with. For companies which are mandated by law , they take the number of working days as 26 and for companies which do not require to pay gratuity but do so as part of a package need to consider working days in a month as 30.

Two important pieces of information required for gratuity calculation are – 

1) Number of years of service with your last employer 

2) Last drawn salary

Gratuity Calculation 

The formula for this calculation is as follows – 

Gratuity= (15* Last salary drawn* No. of working years)/ 26

15 days is for half month’s salary drawn. 26 is the set number of days in a month for an employee. This will change to 30 for the employees working in companies who do not need to pay gratuity. 

Last salary is a combination of Basic salary and Dearness allowance along with incentives.

It is one of the most sizeable retirement solutions which you will get for your number of years of service. The interest rate also changes every quarter as decided under the Small Saving Schemes by the Ministry of Finance. This benefit is available only for employees of organisations. It does not apply to businessmen or self-employed professionals. 

Gratuity Investment Plan Post Retirement

People are unsure of where to invest the gratuity amount because-

  1. i) there are not too many earning opportunities after retirement and 
  2. ii) the risk-taking capacity of an individual is reduced significantly after retirement 

Company Fixed Deposits are a good investment option to multiply the gratuity amount you would receive upon retirement. These FDs easily achieve 1-2% interest rate higher than regular bank FDs and also provide surety of payment unlike stocks and mutual funds.

To ensure you pick the best and most reliable instrument,  you should check on the creditworthiness of the company FDs for guaranteed returns.  They are not insured by the Deposit Insurance and Credit Guarantee of India like bank FDs. Consider company FDs like Bajaj Finance FD with offers 8.95% interest rate for senior citizens along with the assurance of ICRA’s MAAA/Stable rating and CRISIL’s FAAA/Stable rating.

The interest rates are starting from 7.72% for a monthly non-cumulative FD and go up to 8.95% for a cumulative FD. You have the option for a monthly /quarterly or half-yearly interest payouts under the non-cumulative FDs. 

Avail flexible tenors and use strategies like Laddering, which can earn you high rewards even with fluctuating interest rates. Laddering multiple FD investments across different time periods will ensure a continuous stream of FDs which will keep maturing at regular intervals of time and provide a good incoming fund. You can further invest this fund to create a substantial corpus or utilize it by opting for periodic interest payouts. 

Also, take note of various benefits you can receive from Bajaj Finance FD, such as –

  • Online FD calculator 
  • Multi-deposit facility
  • Invest using a debit card
  • Auto-renewal
  • Loan against FD

As a senior citizen, you can look forward to a high interest rate of 8.95% for a 3-year cumulative FD. This is one of the highest in the market which will put your gratuity money to good use.

As the FD interest rate scenario in the market is volatile right now, these interest rates are the best for you.

Post Author: Kathy

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