Retirement Planning: Investment in EPF is done on behalf of the employee’s salary and his company. Currently, you are getting 8.1% interest on your total investment. It can be changed annually. But, the interest earned on the investment changes every year in compound interest.
Retirement Planning: No tax on earnings. Government scheme with the highest interest ever and retirement benefits… So what else do you want? At present, there is no better scheme than Employees Provident Fund. Investment is completely safe with guaranteed returns and tax exemption up to Rs.1.50. Be it small savings schemes or instruments like fixed deposits, no one gives as much interest as this scheme gives. However, these are for the employees. But, they also have to plan for retirement.
If you make a mistake, then the income from interest will go on decreasing.
Investment in EPF is done on behalf of the employee’s salary and his company. Currently, you are getting 8.1% interest on your total investment. It can be changed annually. But, the interest earned on the investment changes every year in compound interest. Understand in simple words, the more your investment, the more interest you will get and next year you will get interest on interest as well. Employers often make a mistake. Claims for EPF withdrawal as soon as the job changes. Many people break investments even when needed. It is not right to do this. Because, this reduces the interest income and every time you withdraw till the time of retirement, you lose lakhs.
Retirement planning: Tax free earning
Understand the rules of EPFO. If EPF is not withdrawn during the job, then there will be huge benefits on retirement. First, a good amount is accumulated for retirement. Your money keeps on increasing due to continuous compounding interest. The special thing is, the fund received after retirement is completely tax free. But, if any kind of withdrawal is done during this period, then tax has to be paid.
Retirement Planning: The benefit of pension is…
Now understand the benefit of pension. If there is no withdrawal in the initial 9 years and 6 months of the job, then you become eligible for EPS i.e. Employee Pension Scheme. In Employee Pension Scheme, you get pension every month after retirement. You must have noticed that the contribution to EPF is done in two ways. First yours and second employer means your company. Out of the company’s share, 8.33 per cent amount goes to the pension fund. Pension starts getting from this pension fund after the age of 58.
Must withdraw on retirement
If you do not withdraw near retirement or on retirement, then there is also a loss in it. According to EPFO rules, if there is a delay in withdrawal from the EPF account after retirement, then tax will have to be paid on the interest earned on the amount. This is because, tax exemption on EPF interest is available only for the employees. After retirement, the person is not counted in the category of employee. That’s why it is necessary to withdraw EPF immediately after retirement.
If you want to withdraw while working, then definitely read these rules
People often withdraw EPF. But, do not withdraw if it is not necessary. This is also because, it reduces the corpus. Along with this, the benefit of interest is also less. But, if you have to withdraw, then keep one rule in mind. Do not withdraw money as soon as the job starts. Withdraw after completing at least 5 years of service. If you withdraw before 5 years, you will have to pay tax on the money withdrawn. But, after completion of 5 years, this rule ends and there is no tax on the withdrawal.
Retirement Planning: Always confused about how long interest is received
In the case of EPF, the most confusion is on how long the interest continues to be received on your account. Actually, EPFO manages the accounts in two ways. First those accounts which are fully active, in which regular investments are being made. Secondly, those accounts, which have become inactive due to some reason. The account is considered inactive if there is no new investment for 3 years. Interest (EPF Interest rate) is available every year on active accounts. Earlier, interest was not available on inoperative accounts. But, after the year 2016, interest is also available on these accounts. The rule is also that if the account has become inactive and the age of the account holder is 58 then interest will not be paid. Interest is available till the age of 58.
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