7 benefits that EPF investing provides to its subscriber
EPF contributions up to Rs 1.50 lakh in a financial year gives tax relaxation under Section 80C of the Income Tax Act. This facility is provided to old tax regime taxpayers.
EPFO: Employees' Provident Fund (EPF) is a retirement fund for private sector employees, which provides them a lump sum amount at the retirement age of 58 years and the monthly pension after that. The employee and the employer both contribute monthly to the employee's account. The minimum monthly basic salary to be eligible for EPF is Rs 15,000. The minimum contribution from the employer's side is Rs 1,800; the maximum is 12 per cent of the employee's basic salary and dearness (DA) allowance). Under specific conditions, Employees' Provident Fund Organisation (EPFO) allows subscribers to withdraw money before the retirement age. In this write-up, know 5 benefits that EPF subscribers get:
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(Disclaimer: This article is not investment advice. Do your own due diligence or consult an advisor before investing.)
Tax benefits under Section 80C
EPF contributions up to Rs 1.50 lakh in a financial year give tax relaxation under Section 80C of the Income Tax Act. This facility is provided to old tax regime taxpayers.
No tax on interest earned
Up to 12 per cent contribution, there is no tax on the interest earned through EPF contribution.
Tax-free maturity amount
One of the best benefits of EPF is that there is no tax on the maturity amount, irrespective of your salary slab. So, even if your maturity amount is Rs 3 crore, you will have to pay no tax on it. The scheme is one of the few that falls in the category of exempt-exempt-exempt (EEE), where deposits, interest earned, and the maturity amount are tax-free.
Monthly pension
EPF provides monthly pensions not only to employees but also to dependents. In case of early death of the subscriber, it provides pension to family members. It provides 7 types of pension.
Superannuation pension; early pension; orphan pension; widow or child pension; nominee pension; dependent parents' pension; disabled pension
Emergency withdrawal
EPF has a lock-in period of the retirement age or 10 years of service, but under specific conditions such as purchase of residential house or construction, medical treatment, and higher education, EPFO allows withdrawal of the fund.
Employees' Deposit Linked Insurance Scheme, 1976 (EDLI)
This is an insurance scheme under EPFO, where every EPF employee gets up to Rs 7 lakh insurance at 0 premium.
Compounding
The scheme offers 8.25 per cent annual compound interest. So the longer one stays in EPF, the faster their retirement corpus will grow.