What is the difference between superannuation and gratuity

After that the organisation cannot retain the employee in its service. So, as regards the retirement benefit on superannuation, it is an organizational pension program, also called Government's or company's pension plan, created by the Government or a company for the benefit of its employees, as a welfare measure, that it continues to pay to the employee after his retirement and till the end of his life, i.

Pension is not permissible in the case of resignation, termination, or dismissal from service, i. Hope you would have now understood the exact difference between the two terms.

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Scorecard Poll Share Files Bookmarks. Member Strength 7,97, and growing.. Get latest updates Submit. It was initially started as a payment plan for employees working with factories but now also extends to establishments under government control, having branches in multiple states. An employee who has rendered services for five years or more is eligible for receiving gratuity benefit. The service rendered needs to be continuous.

However, this rule is relaxed in cases of early death and disablement which can disqualify the employee from continuing work. Usually, the company pays out the gratuity from their pocket or can take an insurance plan for a group of employees as a whole.

Unlike employee provident fund which includes employee's contribution, the gratuity amount is entirely paid by the employer. Under the Payment of Gratuity Act, a certain percentage of the salary is calculated and deposited in a gratuity account payable at a later date.

It works as a superannuation benefit for employee after they leave it. The Act covers all companies with more than ten employees. In case of death, the proceeds are payable to the nominee of the employee. Calculation of gratuity considers the number of years of service in a company, the last drawn basic salary and dearness allowance.

As per the gratuity calculation rule, for every year completed in excess of six months or in part after that, requires the calculation to be done at the rate of 15 days wages. The calculation is done on the last drawn salary.

The number of working days in a month is taken as 26 days — this is beneficial for the calculation. The last drawn salary is divided by 26 and then multiplied by 15 to get the gratuity per year. Also for government employees, dearness allowance is accounted for. Once you receive your gratuity on retirement, it is natural to find equally stable and high yielding options to use these funds.

After thirty to forty years of service, this can be a large amount which should be used wisely to earn you high returns. Also, as a young professional, you will receive gratuity amount on resigning from your job after a continuous service of five years. You will have a sizeable surplus amount to invest.

A fixed deposit with high interest rate and assured returns will ensure your financial well-being even if other high-growth investments in your portfolio do not perform as expected. And here are more reasons to invest your gratuity funds in fixed deposits:. Fixed deposits ensure high stability for your funds — Fixed deposits are far away from the volatility of the stock market movements.

Fluctuations in stock markets do not affect the returns on fixed deposits. Also, changes in interest rates are not too frequent to disturb your return calculations. A high yielding rate of interest - Company fixed deposits like Bajaj Finance Fixed Deposits offer the best interest rates in the market, as high as 8. Senior citizens can avail an additional 0. You can also take advantage of multiple FDs placed with a maturity date one after the other. This concept of laddering will ensure a continuous flow of FD income.

Fixed deposits are apt for ensuring liquidity - FDs provide instant liquidity in times of emergency. You can avail the withdrawal by paying a small penalty and receive immediate cash for use.

Flexible tenor help you ladder your investments - The flexibility of tenor can help you plan your financial corpus in line with various tenor available. You can choose tenor from 12 to 60 months and go for cumulative FD option to gain maximum returns. You can split your gratuity amount into multiple FDs each with a minimum investment of Rs 25, with subsequent maturity timelines. This can be used to pay for emergencies or loans. A superannuation benefit is a retirement benefit offered by an employer to its working class.

Superannuation is an organisational pension program created by a company for the benefit of its employees. It is also referred to as a company pension plan.

Superannuation benefit is classified into the following in India based on the investment and benefit it offers:. It may also be noted that employee may also voluntarily contribute an additional amount to fund in case of defined contribution plans. In case the employee changes his job, he has an option to transfer the superannuation amount to a new employer. In case the new employer does not have a superannuation scheme, the employee may either choose to withdraw the amount or retain the amount in the fund till retirement and withdraw as discussed above.

Like any other retirement benefit, superannuation benefit also provides income tax benefits to both employer and employee. However, such benefits are restricted to an approved superannuation fund. For the Employer Contribution to approved by income tax department superannuation fund is deductible business expense and any income received by self-managed trusts of an approved superannuation fund is also exempt.

Furthermore, any contribution to an approved superannuation fund by the employer exceeding Rs 1.