Is It a Good Idea to Invest Gratuity Funds in an FD (Fixed Deposit)

Know more about how FD can become an ideal investment option for your gratuity lump sum.
Invest Gratuity Funds in FD
3 mins
2 January 2024

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their services. It is available to employees who have completed a minimum of five years of continuous service with the employer. Gratuity is typically calculated as 15 days of basic salary for every completed year of service.

Investing gratuity funds in Fixed Deposits (FD) is a popular investment option among employees. FDs are a safe and secure investment option that offers guaranteed returns. Amidst the ever-changing market scenarios, FDs offer stability by being unaffected by fluctuations in the market.

Using gratuity for FD: How does it work?

When an employee receives a gratuity, they can choose to invest the amount in an FD. The interest rate on FDs is generally higher and lasts for a fixed period. The investment tenure can range from a few months to several years, depending on the investor's preference.

Why should you invest your gratuity in FDs?

  • The most significant advantage of investing your gratuity amount in FDs is the safety and security it provides. FDs are a risk-free investment option as they are not subject to market fluctuations. The Bajaj Finance FD has one of the highest stability ratings in the market and hence ensures the safety of your deposit.
  • Another advantage of investing gratuity funds in FDs is the predictable nature of returns. The interest rate on FD is fixed at the time of investment and does not fluctuate during the investment tenure, helping investors plan their finances better. This will keep your money working for you without you worrying about it.
  • If you are interested in making a regular income from your gratuity lumpsum and yet have your principal amount intact, FD is the best way since you can choose a non-cumulative FD option, and your interest gets paid out as per the payout option chosen. Bajaj Finance FDs have flexible payout options ranging from monthly to yearly, which makes them ideal for short-term goals.
  • Bajaj Finance FDs come with a very competitive interest rate, and yet, give a 0.25% p.a. higher interest rate to senior citizens compared to the regular rates. This comes as an incentive for anyone who is looking to invest, is a senior citizen, and wants the best from their investments.
  • Bajaj Finance FDs come with the benefit of special tenures. Apart from the regular investment tenure, there are special tenures of 15, 18, 22, 30, 33, 42 and 44 months which bring in higher returns. This feature maximises the potential returns your gratuity amount can fetch after being invested in a Bajaj Finance FD.

Look at the two tables below to understand the difference in interest rates between regular tenure and special tenure. The data captured here is for senior citizens.

Interest rates for senior citizens for regular tenure

Tenure in
At maturity (p.a.) Monthly (p.a.) Quarterly (p.a.) Half yearly (p.a.) Annual (p.a.)
12 - 14 7.65% 7.39% 7.44% 7.51% 7.65%
>15-23 7.75% 7.49% 7.53% 7.61% 7.75%
24 8.20% 7.91% 7.96% 8.04% 8.20%
25 - 35 8.20% 7.91% 7.96% 8.04% 8.20%
36 - 60 8.35% 8.05% 8.10% 8.18% 8.35%

Interest rates for senior citizens for special tenure

Tenure in
At maturity (p.a.) Monthly (p.a.) Quarterly (p.a.) Half yearly (p.a.) Annual (p.a.)
15* 7.70% 7.44% 7.49% 7.56% 7.70%
18* 8.05% 7.77% 7.82% 7.89% 8.05%
22* 8.15% 7.86% 7.91% 7.99% 8.15%
30* 7.70% 7.44% 7.49% 7.56% 7.70%
33* 8.35% 8.05% 8.10% 8.18% 8.35%
42* 8.85% 8.51% 8.57% 8.66% 8.85%
44* 8.50% 8.19% 8.24% 8.33% 8.50%

The benefit of safety, security, predictability, flexibility, and higher returns make fixed deposits an ideal investment option for your gratuity money. Moreover, Bajaj Finance offers high FD rates, making it a perfect option for those looking to invest. With the convenience of online FD booking and the use of an FD calculator, investing in FD with Bajaj Finance has never been easier.

Calculate your expected investment returns with the help of our investment calculators

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Frequently asked questions

What is the meaning of gratuity fund?

A gratuity fund is a financial arrangement where employers set aside funds to provide employees with a lump sum payment upon their retirement or exit from the organization as a token of appreciation for their service.

How does gratuity fund work?

Gratuity funds work by collecting contributions from employers over an employee's tenure, often calculated as a percentage of their salary, to create a pool of funds that will be paid out to the employee upon meeting the eligibility criteria.

How can I withdraw my gratuity?

To withdraw your gratuity, you typically need to apply to your employer upon retirement or leaving the organization. The employer will process the payment based on your eligibility and the funds available in the gratuity Fund.

Is it mandatory to pay gratuity?

In India, it is mandatory for employers with ten or more employees to pay gratuity under the Payment of Gratuity Act. Employees become eligible for gratuity after completing a continuous service period of five years with the same employer.

Is 4.5 Years Eligible for Gratuity?

No, in most cases, an employee needs to complete a minimum of five years of continuous service to be eligible for gratuity. Four and a half years would not meet the eligibility criteria for gratuity payment.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.