Tax benefits
In addition to the interest received being tax-free, an employee's contribution to an EPF account qualifies for tax exemption under Section 80C. Experts claim that even if your EPF account has been dormant for longer than three years, it still earns interest. Additionally, after five years of continuous service, EPF withdrawals are not subject to tax unless the enterprise closes its doors or the employee willingly leaves his or her position.
Lifelong pension
While both employers and employees contribute 12% of salaries to the Employees' Provident Fund (EPF), the employer contributes 8.33% of that amount to the Employees' Pension Scheme (EPS). The Employees' Pension Scheme of 1995 guarantees lifelong pension after ten years of contributory membership, according to the retirement fund body.
Insurance benefit
Then there are the advantages guaranteed by the EPFO's Employees Deposit Linked Insurance (EDLI) Scheme, an insurance policy. If the insured individual passes away during the service period, the registered nominee will be given a lump sum payment. The minimum assurance limit under this programme was increased by EPFO last February from Rs 1.5 lakh to Rs 2.5 lakh. A maximum of Rs. 6 lakh is the assurance benefit cap.
Premature withdrawal option
While EPFO strongly discourages using PF funds as a bank account—after all, social security benefits only accrue when continuity is maintained—the organisation does permit its members to make partial withdrawals after 5–10 years of service for addressing particular needs such as medical treatment, home loan repayment, and unemployment.
For instance, an employee's portion of their EPF contributions may be taken up to 50% for wedding or educational expenses and up to 36 times their monthly salary plus a dearness allowance for home construction. Additionally, EPFO permits withdrawals of up to 90% of the growth in the PF account for home loan repayment.
Higher returns
This is not everything. Future increases in the returns on your PF kitty are also a possibility. The EPFO makes exchange-traded fund investments with 5–15% of its investable deposits (ETFs). Members do not have the opportunity to increase the percentage of their retirement savings that will be invested in equities, and the ETF investments do not appear in their accounts. Additionally, the PF fund must be invested in government securities to the tune of 45–50%, debt instruments to the tune of 35–45%, and money market instruments and infrastructure trusts to the tune of 5% each. Because NPS offers more risky investing possibilities, its annual return on PF savings is substantially lower than that of the former.
