The Government of India
offers Employees' Provident Fund (EPF), an investment scheme, with the aim to
encourage retirement savings amongst the salaried. It is an attractive
retirement scheme as the EPF interest rate is usually higher than many other
small savings schemes. Following are the essential facts that you should know
about an Employees’ Provident Fund.
Contribution amount
If you are working in a
company that is registered under the Employees' Provident Fund Organisation
(EPFO), your employer will mandatorily deduct 12% of your ‘Basic + DA’ from
your salary and put this amount in your EPF account. Additionally, your
employer too contributes an equal amount to your EPF account. Should you wish
to make additional contributions to your EPF, you can request your employer to
convert your EPF into VPF. But remember even if you decide to contribute more,
your company may not increase its contribution.
Safety of your investment
Since Provident Fund (PF) is
backed by the Government of India your investment is totally safe. The benefit
of high earnings and assurance of getting the maturity sum at the designated
time is obviously higher for EPF in comparison to market-linked investment
options.
Tax incidence
EPF isvery tax effective as
it enjoys the EEE or Exempt, Exempt, Exempt status. Firstly, the EPF
contribution you make from your salary every year allows you to claim an
exemption of up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961.
Secondly, the interest that you earn on EPF is exempt from tax deductions.
Finally, the maturity proceeds are also exempt from any sort of taxation.
However, you will be taxed on withdrawals you make from your EPF account before
completing 5 years of investment.
Withdrawal rules
You can withdrawfrom your
EPF account when you attain the retirement age as specified by your
organisation. On the other hand, you can withdraw funds from your account if
you remain unemployed for more than 60 days. Apart from this, EPFO allows
partial withdrawals only under certain situations like when you need funds for
medical treatment, home loan repayment, for renovation of an existing house, or
for your child’s wedding.
To make the most of your EPF
returns on maturity, you should consider investing the amount in a Fixed
Deposit for Senior Citizens offered by reputable issuers like Bajaj Finance. By
investing in FDs you can keep the sum secure while ensuring steady growth. This
is because FDs are safe and offer assured returns and at a good rate of
interest.
Bajaj FinanceFixed Deposit for Senior Citizens for instance, offers up to 8.75% when you invest in a cumulative
FD for at least 36 months. If you are a senior citizen, you can earn up to
9.10% when you hold a cumulative FD for at least 36 months. Also, you can opt
to receive payouts regularly, at a frequency that you’re comfortable with be it
monthly, quarterly, half-yearly or annually when you take a non-cumulative FD.
You can treat this as a Best investment ideas for salaried person’sregular income and can be used as a finance living expenses.
Unique
Account Number (UAN)
To make operations easy, your EPF account is linked with a Unique Account Number (UAN). You can use the UAN to track and monitor all the transactions pertaining to your EPF account.
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