Retirement brings the end of an individual’s earning phase unless one chooses to take up other jobs. The prime importance of retirees is to utilize their retirement corpus strategically and ensure a regular income flow. Gratuity is one such benefit that individuals usually receive on retiring. Employers may also pay the fund beforehand, considering certain conditions and gratuity eligibility.
Understanding gratuity in brief
Gratuity is a part of an individual’s salary that an employer pays in gratitude for the services rendered. It can be self-sponsored by the employer or arranged from a group insurance scheme. Note that employees can also choose to make contributions to their gratuity fund. The interim finance minister of India announced to increase the current tax-free gratuity limit to Rs. 30 Lakh in the Interim Budget 2019.
Under the Payment of Gratuity Act, 1972, non-government employees are segregated into –
- Employees not covered under the Act.
- Employees covered under the Act.
The formulae of gratuity calculation are different for these two categories. The amount is almost 16 times higher than the basic pay, up to Rs. 20 Lakh and more. Reinvesting is one of the best ways to make the retirement fund pay you the monthly salary and steady returns.
Reinvestment option for gratuity fund
Of all investment options available, fixed deposits are the safest avenues and free from market fluctuations. Investing your gratuity fund in an FD shall bring guaranteed returns on maturity along with several other benefits.
Below are some of the advantages of fixed deposits.
- Attractive interest rates for senior citizens
Better interest rates for senior citizens make FDs the more preferred choice for gratuity fund investment. With products like Bajaj Finance Fixed Deposit, customers receive up to 8.70% interest rate. Those above 60 years enjoy additional interest up to 0.35% over and above the regular rate.
- Convenient lock-in period
Assess your financial requirements and future plans to choose a convenient tenor. You can go for a shorter tenor between 12 and 60 months. Many financiers offer online FD calculators that instantly compute investment returns based on invested amount, tenor, and the applicable rate of interest. It is free to use 24×7.
- Flexible interest payouts
Financial institutions offer the option of flexible payouts for senior citizens. You can enjoy the benefits of periodic payment of interest on an annual, half-yearly, quarterly, or monthly basis. This facility helps in managing your regular finances easily.
- Emergency access to funds
Another significant benefit is a loan against fixed deposits. This facility allows investors to avail instant cash during emergencies while their investment continues to grow. They can also utilize the interest amount from FD to repay that secured loan more easily.
Alternatively, individuals can break their investments prematurely against a withdrawal charge and get access to the required funds.
- Certification for stability
Fixed deposits from reputed financial organizations are stability certified and hence, safe investment options for retirement. For instance, the Bajaj Finance Fixed Deposit is certified with the highest ratings, MAAA, and FAAA from ICRA and CRISIL, respectively.
This institution is also the only NBFC in India to hold the S&P Global’s international rating of ‘BBB’. Besides the above, customers can enjoy additional perks with this organization, such as:
- Easy tracking of FD accounts online via Experia.
- Minimum investment amount starting from Rs. 25,000.
- Assured returns with no impact from the market.
- Auto-renewal benefit is available.
- Invest in multiple deposits via one cheque payment.
- Make a premature withdrawal from one FD during emergencies, without breaking others.
All these features make fixed Deposits from Bajaj Finance one of the safest in the financial market.
Eligibility for the funds
The minimum gratuity eligibility is 5 years of full-time service in the organization. A person can also receive the fund before, only on the following conditions –
- Disability of the individual in case of disease or accident.
- The demise of the employee. In this case, the employee’s heir or nominee receives the gratuity amount.
Nowadays, financial institutions offer online application forms, making the process simpler. Fill up the form, attached all necessary documents, and submit.
Stagnating gratuity in your regular savings account yields nominal returns. Instead, opt for fixed deposits for higher and assured earnings on maturity. Select a convenient interest payout option to manage your monthly expenses smoothly.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at HighlightStory