EPF News: How important is provident fund? EPFO EXPLAINS why it is so important

EPF News: As soon as people start earning, they try exploring various savings and investment schemes. The salaried class of the country contribute a part of their salary towards the Employees' Provident Fund (EPF) which is a popular savings scheme introduced by the Employees' Provident Fund Organisation (EPFO).

The aim behind introducing EPF scheme is to facilitate saving habit amongst the employees so that a substantial retirement corpus can be built. All the establishments with 20 or more employees can avail the benefits of EPF. Also, companies should be registered under the EPF Act, so that their employees can invest in the EPF or PF.  

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Every month your employer might be deducting employee contribution from your salary towards the EPF account. Both the employer and employee contribute 12 percent of the employee’s basic salary and dearness allowance (DA) to the EPF account. However, do you know why your provident fund is so important? Here are few points to note as explained by EPFO:

1. Higher returns on PF savings: Employees need to know that the money which is deposited in their EPF accounts earns high returns. THE EPFO declares the EPF interest rate every year. Currently, it is 8.5 percent.  

2. Lifelong pension under EPS'95: Employees can also enjoy lifelong pension under the Employees' Pension Scheme (EPS) 1995.

3. Tax exemption under section 80C of the IT Act: An employee's contribution towards an EPF account is eligible for tax exemption under Section 80C. Also, after five years of continuous service EPF withdrawals are not taxable.

4. Partial withdrawal facility for pandemic, unemployment etc: Members of the EPFO can make partial withdrawals after 5-10 years of service for meeting specific needs like medical treatment, unemployment, etc.

5. Minimum assured payment to the nominee in case of death of member: EPFO provides an insurance cover under Employees Deposit Linked Insurance (EDLI) Scheme. Under this scheme the registered nominee will receive a lump-sum payment in the event of the death of the person insured, during the period of the service. The amount that can be availed can be up to a maximum of Rs 6 lakhs.