EPF Account: The Employees Provident Fund (EPF) scheme is a vital financial tool for salaried individuals in India. While most employees are familiar with the basic advantages of EPF, several key features often go unnoticed. Let’s delve into seven such notable features of the EPF:
Pension Benefits: The contribution to the provident fund is split between the EPF (Employee Provident Fund) and EPS (Employee Pension Scheme). While you contribute 12% of your salary, the employer matches this amount. The employer’s contribution is primarily responsible for creating the pension corpus. However, to be eligible for the pension, one must have worked for a minimum of 10 years, and the pension can only be availed post the age of 58. The minimum pension amount stands at ₹1,000.
Nomination Facility: The EPFO (Employee Provident Fund Organization) has stressed the importance of regularly updating your nominee details. In the unfortunate event of the subscriber’s demise, the nominated person can easily claim the EPF amount.
Investing in VPF: Apart from the mandatory EPF, employees have the option of investing in the Voluntary Provident Fund (VPF). This allows for an additional contribution beyond the basic salary component.
Withdrawal Rules: Withdrawing from the EPF isn’t straightforward. You cannot simply withdraw funds upon switching jobs. Withdrawals are permissible only if you’ve been unemployed for at least two months. Transfers are feasible upon securing a new job.
Partial Withdrawals: The EPF also facilitates partial withdrawals, subject to certain conditions. For instance, funds can be withdrawn for personal, siblings’, or children’s education or weddings. However, only up to 50% of the accumulated amount can be accessed, and that too after the account has been active for a minimum of seven years. There are provisions for withdrawing money for major medical treatments for self or family, repaying housing loans, purchasing or constructing a house, and even for home renovations.
Interest on EPF: An annual compounded interest is credited to the EPF balance. Currently, the government provides an interest rate of 8.15% on EPF. However, the EPS corpus doesn’t accrue any interest; you only get back what has been accumulated.
Life Insurance: For organizations that don’t offer life insurance benefits, the EDLI (Employees’ Deposit Linked Insurance) scheme can come to the rescue, providing life coverage. However, the coverage under this scheme is relatively minimal.
In summary, the EPF scheme is not just a retirement savings tool; it encompasses a range of features that cater to various financial needs throughout an individual’s career.