If you do not withdraw money from the PF account before retirement, then they can accumulate good funds.
When the salary slip is received every month, it can look bad if the income in hand from various deductions is reduced. However, one of these deductions can make you a millionaire when you retire. This is your monthly contribution to the Employees’ Provident Fund (EPF).
The interest earned on your EPF fund for the last financial year is 8.5 percent. This is higher than the interest offered by banks on fixed deposits and many government savings schemes.
With this interest rate a person with a basic salary of Rs 25,000 can have around Rs 1.65 lakh crore accumulated in 35 years. The interest earned on EPF is tax free. Equal contribution is also made by the employer in this fund.
o deposit more than Rs 1 crore in your EPF investment, you need to ensure that you do not withdraw the amount from your EPF account till you retire. Withdrawal from EPF within five years of starting a job has to be taxed.
You can transfer the balance to the new account on change of job.
Pranjal Kamra, Chief Investment Officer, Finology said, “Assuming the average inflation in the country to be around 6 per cent over the long term and the interest on EPF around 8.5 per cent, one can get a good fund with retirement. Wealth builds up over the long term and makes for a good fund. One should avoid withdrawing funds from EPF in the initial years.
Jay Zaveri, Partner, Bhuta Shah & Co, says that this is a deduction that does not have a big impact on income and at the same time helps in emergencies besides beating return inflation.
Employees also get the facility of loan against the amount deposited in the Provident Fund. However, this loan can be taken only for certain reasons.
