Not just income tax exemption, EPFO members eligible for pension, free insurance benefit of up to Rs 6 lakh under Employees Deposit Linked Insurance Scheme | EXPLAINED

EPFO Member: The Employees' Provident Fund Organisation (EPFO) not just gives a Provident Fund (PF) account holder or EPF account holder the benefit of claiming income tax exemption on up to Rs 1.5 lakh investment at the time of income tax return (ITR) filing. An EPF passbook holder is eligible for free insurance of up to Rs 6 lakh under Employees Deposit Linked Insurance Scheme or EDLI. Apart from this, EPFO subscriber is eligible for a monthly pension too if the employee has continued with the same EPF account for at least 20 years.

Speaking on the lesser known free insurance and pension benefit for an EPF account holder; SEBI registered tax and investment expert Jitendra Solanki said, "An EPFO subscriber automatically becomes eligible for free insurance cover up to Rs 6 lakh under EDLI in EPF account opening. Similarly, the EPF account holder's EPS account gets active as and when its EPF account is opened. However, to get EPS benefits, the EPFO member's EPF account has to be at least 20 year old at the time of retirement."

Solanki said that insurance is free of cost for the EPF account holder as he or she need not to pay any premium for it. he went on to add that if an EPF account holder dies during the service period, his nominee or natural heirs will be eligible for up to Rs 6 lakh insurance under EDLI benefit.

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Elaborating Upon the pension calculation for the EPFO member at the time of retirement; Pankaj Mathpal, MD at Optima Money said, "The monthly pension under the EPS is calculated by the number of companies served multiplied by the last salary drawn divided by 70 or (number of company served x last salary drawn)/70."

Mathpal said that when one's EPF account is opened 12 per cent monthly EPF contribution is given by the employee while the same percentage is contributed by its employer. However, out of the net 12 per cent contributed by the employers 8.33 per cent goes into the EPS account meant for pension. Rest 3.67 per cent goes into the EPF account. Hence, during the EPF passbook balance check, one would found that the net balance is not double of what the employee has contributed."