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The interest levied on loans against PF balance is 1 per centThe Staff members' Provident Fund (EPF) is among the most widely used investment tools by salaried individuals.
The EPF, commonly called simply the PF, is a government-backed cost savings plan for workers of the organised sector.
Thought about a post-retirement or social security plan, a lot of facilities need to extend this center to their workers.
Workers and companies both add to the fund, which is managed by the federal government and, ultimately, withdrawn by the individual on her/his retirement.
The individual earns interest on the amount accumulated in the fund over a period of time.Other benefits of opening a PF account are:1.
LoansIndividuals can take loans against the cash currently built up in their PF accounts.
The interest levied on loans against PF balance is 1 percent, and the money has to be paid back within three years of the date of loan disbursal.2.
Tax BenefitsThe staff member's contribution towards the PF is eligible for tax exemption under Area 80C of the Earnings Tax Act.
Additionally, the interest made on the quantity deposited is also exempted from income tax.
Some specialists state the account holder earns interest even if the PF account is lying dormant for more than three years.
EPF withdrawals are not taxable after 5 years of constant service.3.
Free InsuranceUnder the Workers' Deposit Linked Insurance (EDLI) plan, a candidate or legal heir of an active EPFO member gets a lump sum payment of as much as Rs.
7 lakh in case of death of the member throughout the service duration.
All organisations covered under EPF and Miscellaneous Provisions Act, 1952, get registered for EDLI immediately.4.
PensionA PF account holder is also qualified for pension after 58 years of age, however the individual has to contribute routinely (month-to-month) to the PF account for at least 15 years.
While employers and workers both contribute 12 percent of the wage to the EPF, 8.33 percent of the employer's share is diverted towards the Workers' Pension Plan (EPS).5.
Premature withdrawalThe EPFO allows members to partially withdraw after 5-10 years of service to meet specific requirements including medical, home mortgage payment, and unemployment.
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