Your EPF account will give higher returns. The Ministry of Labour and Employment has stated that the Central Board of Trustees, CBT, the apex policy making body of the Employee Provident Fund Organization, has recommended EPFO interest rate of 8.65% for current financial year (FY 2018-19). The EPF rate was 8.55% for the financial year (FY 2017-18). The EPF rate hike from 8.55% to 8.65% a year is the first hike in the past 3 years.
According to Labour Minister Santhosh Gangwar, EPFO has decided to offer EPF interest rate of 8.65% for FY 2018-19. This is great news for you and the more than 6 crore EPF subscribers. There’s more money in EPF account and this means higher compounding, enabling higher return on investment. Compounding benefit means return on return.
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You (employee) make a contribution of 12% of basic wages + dearness allowance towards EPF scheme. Your employer makes an equal contribution.
Let’s say your basic monthly salary is Rs 30,000. Your (employee) contribution towards EPF scheme is Rs 3,600 (This is 12% of basic pay). Your employer makes an equal contribution towards your EPF account.
Out of your employer contribution, 8.33% is diverted to Employees Pension Scheme or EPS. This is calculated on Rs 15,000. So, if you (employee) have a basic pay of Rs 15,000 a month or even more than this, then 8.33% of Rs 15,000 or Rs 1,250 a month goes to EPS. If your basic pay is less than Rs 15,000 a month, then 8.33% of this amount goes to EPS.
EPF scheme enjoys EEE tax benefit. The amount invested in EPF scheme enjoys tax benefits up to Rs 1.5 Lakhs a year under Section 80C of the income tax benefit. The interest earned and amount withdrawn at maturity are tax-free.
You can voluntary make a higher contribution to EPF (More than mandatory 12% of basic pay). This contribution goes towards a separate account called Voluntary Provident Fund or VPF. VPF gives tax free returns and same interest as EPF scheme. The employer doesn’t match this contribution.
EPF calculator helps calculate amount accumulated at retirement. Calculate EPF corpus as follows:
Enter these figures in the calculator:
What EPF calculator shows? Enter this information and make a submission. EPF calculator shows how much you save at retirement. You see accumulated EPF amount at retirement.
If you are a conservative investor, then EPF is a very good investment. EPF gives highest returns compared to most fixed income investments. EPF interest rate is 8.65% for FY 2018-19.
PPF and NSC give 8% interest rate a year. Kisan Vikas Patra (KVP) gives 7.7% a year. Sukanya Samraddhi Yojana Scheme gives 8.5% a year. Only SCSS (Senior Citizens Saving Scheme) interest rate of 8.7% is higher, but only senior citizens can apply to this scheme. EPF gives higher returns than fixed deposits and interest earned is tax free. Fixed Deposit interest is taxed.
PPF currently offers 8% for the January – March 2019. EPF offers 8.65% for FY 2018-19. EPF offers higher returns than PPF. Both EPF and PPF enjoy EEE tax benefits, where principal invested gets Section 80C benefits up to Rs 1.5 Lakhs a year. Interest earned and amount withdrawn at maturity is tax-free.
High EPF interest rates are encouraging investors to invest in EPF scheme. Here’s a note of caution. RBI cut repo rate from 6.5% to 6.25% in the last monetary review policy meet. This is a signal for lower interest rates in the future. Keep this in mind when investing in EPF scheme.
EPFO reviews interest rates each year and EPF interest rates are applicable to EPF accumulated corpus and EPF contributions in that year.
If you have worked for many organizations, you’ll have multiple member IDs. You can link multiple member IDs to the single UAN.
Your employer gives UAN and you (employee) get it activated by providing relevant KYC documents to employer. If you are changing jobs and have a UAN, there’s no need to get new UAN from employer. UAN is permanent and remains same across career.
Collect UAN from employer: Your former employer gives UAN and member ID to new employer.
Visit EPFO website: Click on ‘Activate your UAN’ based registration tab. Read the instructions and then click, “I have read and understood the instructions”.
Information: Enter UAN and mobile number. Select state and PF office from dropdown option. Enter member ID and then click, “Get PIN”.
Authorization: A PIN is sent to registered mobile number. Enter the number, make a submission and complete the activation process.
User ID and Password: After completing activation, you (member) would be prompted to create login user ID and password for accessing UAN services offered by portal.
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