If you have been reading the newspapers, you would have come across a very sad incident. A violent strike by garment workers in Bengaluru. Police had to be called to bring the situation under control. Why did this happen? Simple…. The Employee Provident Fund popularly called the EPF, triggered a deadly clash.
If you are a salaried employee, you would have to compulsorily contribute 12% of your basic salary, towards your EPF. Your Employer also contributes the same amount towards your EPF. This is something great for you. You are paid a very high interest of 8.8% a year, on the money in your EPF. This is for the Financial Year 2015 -2016. You also get EEE benefits, on the money in your EPF account. You get a tax deduction up to INR 1.5 Lakhs per year on your taxable salary, under Section 80 C of the income tax act. The money which accumulates and the money you get at withdrawal, are both tax free.
The Government used to allow you (employee), to withdraw your total EPF amount (your + employer contribution), even before retirement under certain conditions. When you leave your current job and have not found another job for over 2 months, you can withdraw your money from the EPF. You need money for a medical emergency (say a critical illness) or to fund your son or daughters marriage, or to pay back a home loan, you can withdraw your money from the EPF.
The Government passed a new rule: Employer’s contribution towards your EPF , can be withdrawn only at the retirement age of 58 years. Garment workers earn around INR 7,000 to INR 10,000 a month. They also switch jobs regularly. Between jobs, garment workers need money for their livelihood. If they cannot withdraw the whole EPF amount, they would face a lot of difficulty in managing expenses. Fearing this garment workers went on a violent strike…..
SEE ALSO: Prepayment Of Home Loan
It was noticed that more than 70-80% of the claims which were settled by EPFO, were premature withdrawals. Citizens used EPFO as a savings scheme, rather than a social security scheme, where money was saved for retirement. Citizens withdrew money from the EPF, to buy items of personal consumption such as laptops. Money was spent on lavish weddings.
The result of the strike
Government Bows Before Angry Garment Workers. Eases EPF Withdrawal Norms. The rules are now same as before. You can withdraw your employer contribution before 58 years (retirement).
The Government should have educated you (citizens), on the benefits of EPF for retirement. Why you should save for retirement? You should have been educated on the need for retirement planning. What money would you have at retirement, if you spent all your money now? The Government wants you to have a decent life after retirement. The intent of the Government was good, but the method used was bad.
So what did you learn from the EPF mess? Is the Government in the right, or are the garment workers justified in what they did?
This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.