PF vs Gratuity: Eligibility, Withdrawal Rules & Benefits

Planning for financial security is a crucial aspect of every working professional’s life. Provident Fund (PF) and Gratuity are two key employee benefits designed to ensure long-term financial stability. While PF builds a retirement corpus through regular contributions, Gratuity serves as a reward for loyalty and long-term service. Together, these schemes play a pivotal role in securing your financial future.

If you are looking to grow your savings further, Bajaj Finance Fixed Deposit (FD) offers assured returns up to 7.30% p.a., making it an excellent complement to your PF and Gratuity benefits (check eligibility). Let us explore the differences between PF and Gratuity, their eligibility criteria, tax implications, and how you can leverage these benefits for a secure future.

A Provident Fund is a government-backed retirement savings scheme where both the employer and employee contribute a percentage of the employee’s salary. It ensures financial security post-retirement or in unforeseen circumstances.

Key features of Provident Fund

• Employee contribution: Typically 12% of basic salary.
• Employer contribution: Matches the employee’s contribution (12%).
• Interest rate: Accumulated funds grow with government-provided interest (usually 8-9% annually).
• Tax benefits: Contributions are tax-deductible under Section 80C of the Income Tax Act.
• Eligibility: Mandatory for employees earning up to Rs. 15,000 per month in establishments with 20 or more employees.

Pro Tip: Supplement your PF savings with Bajaj Finance Fixed Deposit for assured returns unaffected by market fluctuations. Check latest rates. 

Gratuity is a lump-sum financial benefit paid by employers to employees as a reward for long-term service. Governed by the Payment of Gratuity Act, 1972, it is a token of appreciation for loyalty and dedication.

Key features of Gratuity

• Payment type: One-time lump sum.
• Eligibility: Minimum 5 years of continuous service with the same employer.
• Tax benefits: Tax-free up to Rs. 20 lakh under the Income Tax Act.
• Nomination: Employees must nominate a person to receive gratuity in case of death.

Did You Know? 

You can invest your gratuity payout in a Bajaj Finance Fixed Deposit to ensure steady returns and grow your savings further. Start now, with as low as Rs. 15,000. 

Understanding the key differences between PF and Gratuity can help you plan your finances effectively.

Tax treatment for PF and Gratuity differs based on the nature of contributions and payouts.

Provident Fund

• Employee contributions: Tax-deductible under Section 80C.
• Interest earnings: Tax-free until withdrawal.
• Withdrawal: Tax-free under specific conditions, such as retirement or job change after five years of continuous service.

Gratuity

• Tax exemption: Tax-free up to Rs. 20 lakh for government employees.
• Non-government employees: The least of the following is exempt:
  • Rs. 20 lakh.
  • Eligible gratuity amount.
  • Actual gratuity received.

Employers play a significant role in ensuring compliance and timely payouts for PF and Gratuity.

Provident Fund

• Calculate and deposit contributions to the Employees’ Provident Fund Organisation (EPFO).
• Maintain accurate records of employee PF accounts.
• Facilitate portability of PF accounts during job changes.

Gratuity

• Calculate gratuity based on the employee’s last drawn salary and years of service.
• Ensure timely payout within 30 days of it becoming payable.
• Set up a Gratuity Fund for advance preparation.

By automating PF and Gratuity management, employers can streamline processes and ensure employee satisfaction.

Both Provident Fund and Gratuity are essential components of employee benefits, providing financial security and rewarding long-term loyalty. While PF ensures a steady retirement corpus, Gratuity serves as a token of appreciation for your years of service.

To make the most of these benefits, consider investing your PF and Gratuity payouts in a Bajaj Finance Fixed Deposit. With assured returns up to 7.30% p.a., flexible tenure options, and high stability ratings (CRISIL AAA/STABLE and [ICRA]AAA(STABLE)), Bajaj Finance FD is the perfect solution to grow your savings and secure your financial future.

So act now! Do not let your PF and Gratuity savings sit idle. Open a Bajaj Finance FD today and start earning guaranteed returns.