Should you Invest in EPF?

Invest in EMployee Provident Fund account

Introduction

Employee Provident Fund is both an Investment with pension benefits and a life insurance scheme. It is a retirement saving account specifically designed for working-class Indians. It provides an interest rate of 8.5% p.a (as of July 2021). EPFO is the world’s largest Social security organization. Think of the amount of money they collect each year!

At present, there are over 20 crore EPF accounts. And, after hearing out the benefits, you’ll definitely feel like getting yourself an account opened!

So, How is PF calculated?

First of all, you’ll be eligible for EPF only if your salary (I.e, Basic Salary + Dearness Allowance) is at or below Rs.15,000 per month and your employer should have at least 20 employees working under them.

Let’s say, you earn Rs.15,000 per month.

You will need to contribute 12% of your Salary (I.e, Basic Salary + Dearness Allowance, if any) and your employer will contribute, to your account his share of 12%.

Of this 24% (12% + 12%), Your share of 12% will go to the Employees Provident Fund account. And, your employer’s share of 12% is split into two parts as 8.33% towards “Employee Pension Scheme – EPS” and the balance 3.67% towards the usual EPF account.

So, 15.67% (12% + 3.67%) will get adds up to your wealth every year. whereas the balance of 8.33% goes to your pension benefits.

Now, If your salary is above Rs.15,000 then, it’s not mandatory for your employer to contribute. But, you very well can have a PF account for yourself cause the benefits outweigh the cost involved.

To those individuals who are ineligible for EPF (as mentioned earlier). You can open a PF on your own.

Wait, let’s check out the benefits first! right?

Benefits of Provident Fund account:

Pension scheme:

Provident Fund is the largest mandatory state pension scheme for people in India (for those eligible). Thus, Provident Fund account holders get a pension after the age of 58 years. The amount of pension varies from Rs.1,000 to Rs.7,500 per month. And, this amount is taxable! (Exempt in case you are a government employee).

High-interest rate Savings:

At 8.5% interest rates, the PF account is no less than any other Fixed deposit out there. In fact, I’m pretty sure, a compounded 8.5% interest accumulation will probably beat many fund manager’s annual returns! So, this gives a better return than one expects.

Tax Benefits:

Who amongst us doesn’t want to save on taxes. Right? With a PF contribution, you can save on taxes! With PF, you can save under section 80 (C), up to Rs.1,50,000. 

Life Insurance:

As said earlier, the PF account is also a life insurance scheme. In case of death during the service period, a PF account is eligible for Rs. 7 lakh as an Insurance amount, and the nominee gets the amount.

Legal immunity:

Now this is the most interesting point! Your PPF account cannot be attached to pay off any liability through the court of law. It’s a beautiful lifevest for an individual who has lost everything in life. None can touch your PF account.

So, if the benefits are something of your interest. Then, consider having your PF account opened.

Steps to Open Provident Fund account Online;

PPF account can be easily opened in a designated post office or a bank branch. Prerequisites to Open a PPF Account Online are as follows;

  1. Go to your bank’s mobile application. (You should have Net Banking/Mobile Banking access).
  2. Click on the “New PPF Account” option.
  3. Your details such as Name, Address, CIF number (Customer Information File), and PAN will appear.
  4. Post-approval of the above-mentioned details, enter the bank branch name & branch code.
  5. Give five (5) nominee details of your choice. And, submit.
  6. Verify the given details and proceed.
  7. Your PPF account will be created and a PPF account number will be provided. 
  8. Print the PPF Online application form.
  9. Visit your nearby bank branch along with the printed form, KYC documents (Aadhar, PAN), and a photograph within 30 days to complete the account opening process.
  10. To open your PPF account offline, Visit your nearby Post office or bank branch.

Once you open your PPF account. Try your best to fund the account as much as possible and don’t stop your contribution. Invest wisely.

Watch YouTube video for more information:

Disclaimer: All the information on this website is published in good faith and for general information purpose only.

Also read:

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5paisa Review 2021: Everything you need to know!
Groww Review 2021: Everything you need to know!
Motilal Review 2021: Everything you need to know!
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