New Delhi: Employee Provident Fund (EPF) not only provides financial security to employees at the time of retirement, but also grows the money over time with the help of compounding. In this article, we will explain to you in detail about EPF and know how it is right for you.
Contribution to EPF
Every employee has to contribute 12% of his basic salary to EPF. This amount is deducted from the salary of the employees and deposited in the EPF account.
Contribution to EPF is divided into two parts.
8.33% of the amount goes to the Employees’ Pension Scheme (EPS).
3.67% amount is deposited in the EPF account.
In this way, the employee and the employer together create a strong fund, which grows over time.
power of compounding
EPF earns an interest rate of 8% to 12% every year, which is decided by the government. This interest increases on the basis of compound interest i.e. interest is earned on the previously accumulated interest as well. This is the reason why investing in EPF can multiply the money in the long run, making it a safe option for retirement.
Rules for withdrawing money from EPF
EPF amount can be withdrawn under certain circumstances.
1. Full withdrawal after retirement
Employees can withdraw the entire balance of their EPF after the age of 58 years. It can be claimed online through the EPFO portal.
2. Withdrawal before retirement
If an employee remains unemployed for more than a month, he can withdraw 75% of his EPF amount. If the unemployment exceeds two months, the remaining 25% can also be withdrawn.
3. Medical emergency
Employees can withdraw up to 6 times their basic salary (whatever be) deposited in EPF when they face an emergency.
4. Wedding expenses
If the employee has completed 7 years of service, he can withdraw up to 50% of his EPF amount for wedding expenses.
5. Education
For higher education also if the employee has completed 7 years of service, he can withdraw up to 50% of his EPF amount.
Benefits of EPF
- Safe investment: EPF is a risk-free investment as it is backed by the government.
- Interest Rate: EPF offers high interest, which increases through compounding.
- Tax free: EPF interest and withdrawals are tax free, making it an attractive option.
- Long-term benefits: Regular contributions to EPF create a good fund at the time of retirement, ensuring lifelong financial stability.
EPF is a safe investment, if you invest in it for a long time, it can make your retirement financially secure.
