Tuesday, August 6, 2019

Gratuity- Eligibility, Rules 2019, and Calculation Formula


Gratuity is an amount paid to an employee on account of his/her long term association with an organization or firm. To be eligible for gratuity, an employee has to complete at least five years of service. You are also eligible for this amount if you change your job after five years of continuous service in an organization. If the gratuity amount goes unclaimed till retirement, then the employee will receive it after retirement.

Let us see how gratuity is calculated in India:

Gratuity calculation formula depends on the last drawn salary of the employee and his/her period of service. Earlier, the tax exemption limit on gratuity was Rs. 10 lakhs which has been increased up to Rs. 20 lakhs as per the latest amendment bill.

There are two formulae according to which the gratuity is calculated. The first formula which applies to the organizations that are covered under the gratuity act is as follows:

          Gratuity = (the last drawn salary) x (total years of service) x (15/26)

The second formula applies to the organizations which are not covered under the gratuity act but still prefer to pay gratuity to their employees. The formula applicable in this case is as follows:

          Gratuity = (the last drawn salary) x (total years of service) x (15/30)

You must remember that the last drawn salary includes basic salary and other fixed components that can be seen on your salary slip. Dearness allowance, performance incentives or any other variable pay are not considered while calculating the final gratuity amount.

Gratuity amount helps you collect a large corpus till retirement. However, it is best to figure out other high-paying investment options which can help you to fulfill your short term and long term financial requirements. One such lucrative investment option is fixed deposits. NBFCs like Bajaj Finance provide high-interest rates up to 8.95% on their corporate FDs, and they also allow the investors to start investing with just Rs. 25,000. Let us see how to invest in corporate FD from Bajaj Finance:

You don't have to wait in long queues to submit the FD application form as Bajaj Finance allows you to fill and submit the form online. After the verification of your eligibility, the company will send an executive at your home or office to collect the necessary documents and cheque. Your FD gets booked after that, and you can also manage your FD account online through Experia- your online fixed deposit account.

The online procedure is convenient and hassle-free. Alternatively, you can also visit the nearest branch to book an FD.

You can also consider investing your gratuity amount in a corporate FD. You will benefit from these features if you choose to invest your gratuity amount in a corporate FD.

High-interest earnings

Bajaj Finance offers interest rates up to 8.95%. These FDs are certified for their safety and stability by CRISIL and ICRA. As a result, you get assured and high returns. The table below shows the interest rates offered on Bajaj Finance FD:

Tenor in Months
Minimum deposit (in Rs.)
12 – 23
24 – 35
Special tenors scheme
15 Months

Flexible investment terms

With Bajaj Finance FDs you can choose tenor from 12 to 60 months according to your financial needs. You can start investing with a nominal amount of Rs. 25,000. You can also use the multi-deposit facility to invest in multiple fixed deposits through a single lump sum payment. You can set interest payout frequency and tenors for each FD separately. To check your returns in advance, use the online FD calculator.

Author: verified_user

1 comment:

  1. wow amazing article
    really very helpful to increase my knowledge Thanks for sharing your Golden words with us
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