If you are a salaried employee, you must be well familiar with the employee provident fund popularly called EPF. Your employer compulsorily deducts 12% of your basic salary and deposits this amount in an account in your name called EPF. An equal contribution is made by your employer towards this account. EPF offers an interest rate of 8.55% for Financial Year 2017-18.
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EPF is an excellent plan for retirement. Your money gets invested and you earn 8.55% a year on this investment. This is more than FDs or even PPF. EPF gives one of the highest rates of interest among fixed income instruments.
EPF even invests a part of your money in equity via ETFs. An investment in equity has the potential to give high returns but at high risk. Only a small portion of EPF money is invested in equity. Most of the money is in safe risk-free instruments.
Benefits of EPF
Tax Benefits: EPF enjoys the EEE benefit. This makes it an excellent instrument to save tax. The amount you invest up to Rs 1.5 Lakhs a year enjoys a tax deduction under Section 80C. The interest you earn and the amount is withdrawn are tax-free.
If you are unemployed– If you are out of job for 2 months or more, you can claim the money from EPF.
On the death of the employee - The accumulated amount is passed on to the employee’s nominees on his death, providing them financial assistance when they desperately need it.
On disability of the employee - If employees cannot work due to disabilities or an accident, EPF balances can be withdrawn to tide over the crisis.
Pension for salaried employees: Part of the money a salaried employee contributes, is deposited in the EPS (Employee Pension Scheme). The employee and his family enjoy a pension through the EPS.
How To Get A Loan Against EPF?
A loan against EPF is not a loan per se. It’s an advance which you can avail only in specific situations. You can enjoy this advance even when you are still working. The amount you get as an advance depends on the specific situation you need the money for and also the number of years you are in service.
You must apply for advances from EPF through the Form 31.
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On your marriage: You can take an advance against EPF for marriage expenses of self/brother/sister/daughter. You can get a maximum of 50% of your share + interest.
For quality education: You are allowed to take an advance against EPF for college fees for self/brother/sister/daughter or son. You can get a maximum of 50% of your share + interest.
Buying a dream home: You are allowed to take an advance against EPF to buy your home or even a plot of land. You get a maximum of 36 months basic salary + Dearness allowance or the total of your + employer share with interest or total cost of purchase of the house, whichever is the least.
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