I withdrew my PF every time I made a job change, and I am deeply regretting for it.
EPF or Employee Provident Fund is a great long-term investment, and once everybody understands the value it gives, no body would step up to withdraw it. Am writing this post to educate myself, and also others, to be more aware of the EPF benefits and why is EPF important?
EPF is compounded annually.
Did you notice the word “compounded”?. EPF is compounded at a rate of 8.5 to 9.5% which means any person with a basic salary of Rs 25000 could accumulate 1.65 crores in 35 yrs . Look at the growth!
EPF is safe , secure & low risk.
EPF is safe because it is with the government. People say ” It is hard to do huge amount as EPF withdrawal from the government” , but it is myth . Now the government has a well built online system , and epf withdrawal is far more easier than ever.
EPF is taxable on premature withdrawals
EPF is taxable at 10 % when withdrawn before 5yrs . The tax rate 10% is very high.
UPDATE: Full EPF withdrawal is NOT allowed now, only 50% is allowed (This isn’t applicable for women employees who’re leaving employment due to marriage, childbirth). The remaining 50% will be settled only at age of 56.
Or, if incase you have plans to buy a flat or home, 90% PF withdrawal is allowed.
10% tax applies for the 50% PF withdrawal that is done before 5 yrs.
Tax free for PF withdrawals of up to Rs 50,000
“One of my friends withdrew his PF INR 1,00,000 in his 4th year after leaving the job, and paid tax of INR 10,000 as a result of premature withdrawal. If he had waited for a year, he could have saved INR 10,000.”
VPF: Contributing more to EPF
Usually 12% of your basic goes to PF , but you wish to add more, it is possible . In fact , it is recommended . Remember money gets doubled!
EPF: Any employee could avail a loan against it
Employees could take a loan against their accumulated funds in employee provident fund . However , it depends on permissible rules and circumstances . Loan for housing , marriage , childhood education are permitted .
Never go for EPF withdrawal as long as you are in the service of employment.