You may not know, but PF, aka Provident Fund, is one of the commonly used investment schemes, especially by the country’s salaried class. If you want to know the amazing benefits, let me tell you that PF’s benefits are extended to all establishments with 20 other employees. If you want to know the benefits by yourself and know Why PF Is Important, then you may get in touch with an ESI Consultant or keep reading this article.
Today, we are here to discuss Why PF Is Important and its benefits so that you can avail yourself as well.
The Benefits Of Having A PF Account
● Tax Benefits
Did you know this fact? Well, you should know that an employee’s contribution towards a PF account is eligible for tax exemption under section 80C, and the interest rate is also earned from income tax. As the expert says, your PF account is here to earn interest even if it has been lying dormant for more than three years. Apart from that, the PF withdrawals are not taxable even after five years of continuous service. If you wish to have a detailed idea, then ESI PF Consultant can have your back and explain everything to you!
● Pension For The Rest Of Life
You may not know, but employers and employees both contribute 12% of PF wages, while 8.33% of the employer’s share is equally divided towards the employees’ pension. Hence, if you have been investing for ten years, then you will surely get a lifelong pension under the Employees’ pension scheme. What else are you seeking? In case you want to know more details, ESI PF Consultant can help you with that.
● Insurance Benefit
However, we have mentioned two of the benefits earlier. But, this insurance benefit is the most significant factor you may consider going for PF/ESI. You may not know this scheme, but once you have enlisted your name under the PF scheme, your registered nominee will receive a lump-sum payment in the event of the death of the person who was insured. If the person is you, you eventually ensure the nominee’s lifelong pension or a handsome amount. So, in that way, you will be able to ensure everything even if you are dead! The maximum amount the nominee can get is somewhere around six lacks.
However, any employee who has a PF amount automatically becomes eligible for this scheme, but the person does not need to contribute to it. On the other hand, an employee has to contribute at least 0.5% of the basic salary! Hence, the amount will never be too much. If you are a company owner and want to secure your employees’ lives after their retirement, you may get in touch with a consultant. A consultant can make sure the employees’ are not paying a huge amount, but they are getting enough in return.
● Premature withdrawal option
You might not know, but EPFO always advises against treating PF money as your bank account. The social security benefits accrue at the time of continuity is maintained, and the body allows the members to make any kind of partial withdrawal after 5-10 years of service. Of course, you will have to meet specific needs that include home loan repayment, medical treatment, and most importantly, unemployment.
You will be amazed to know that more than 50% of employees’ contribution to the EPF can be education or marriage. On the other hand, an amount up to 36 times the monthly wage plus allowance can easily be withdrawn for house construction and others. It will also allow you to withdraw up to 90% of the total amount in the PF account when it comes to repaying a home loan.
● The return amount will be higher
If you think that’s all, then let me explain to you the possibility of higher returns on your PF in future. You may know that the EPFO generally invests 5-15% of the investible deposits in return for traded funds. Although the traded fund benefits will never reflect in your account, they will not have any option to increase the proportion of the total savings and invest in the stocks. However, 40-50% of the PF needs to be invested in government security while another 35-45% in debt instruments. Apart from that, 5% of the amount should be invested in infrastructure trusts. This is the biggest reason you may get the annual return in your PF savings much higher, and it will surely make you happy!
With PF, you can always expect a higher return than you have invested!
So, what are you still waiting for? You should read the benefits and start investing a certain percentage of your salary to secure your life after retirement. Who doesn’t need to have a stress-free life after retirement?