Tax Savings Tuesday: Breaking Down EPF

Employees Provident Fund, what is it, and how does it work?

Hello and welcome to another edition of Tax Saver Tuesdays!

Last week we explored the National Savings Certificate Scheme.
Today we continue with the fifth edition of Tax Saving Tuesdays with a tax saving instrument that you must be a member of if you’re a salaried employee. We’re talking about the Employees Provident Fund (EPF).

What is EPF?

EPF was introduced by the Employees Provident Fund Organization (EPFO) under the supervision of the Government of India. EPFO is a statutory body under the Ministry of Labour and Employment.

EPF is a savings scheme for employees and is available to all salaried employees in India. In EPF both the employee and employer contribute to the corpus every month. It's designed to help you save a portion of your salary, so you have a lump sum available at retirement or when you need it.

EPF Schemes

The EPF consists of three different schemes, when you register for EPF, you also register for the other two schemes. The three schemes are:

• Employees' Provident Funds Scheme 1952 (EPF)
  This is where your retirement benefits are accumulated

• Employees' Pension Scheme 1995 (EPS)
  The purpose of this scheme is to generate a pension for members after the age
  of 58

• Employees' Deposit Linked Insurance Scheme 1976 (EDLI)
  This scheme is a life insurance cover

Application for EPF

All employees are enrolled in the EPF scheme through their employers. Enrollment is open for both private-sector and public-sector employees. Businesses however need to have a minimum strength of 20 employees to register under the scheme.

Withdrawal
You can withdraw 100% of your corpus in the following three circumstances

• When you reach 58 years of age

• If you are unemployed for two months or more

• In the event of your untimely demise, the entire corpus is transferred to your nominee

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Key Benefits:

• Safety and Growth: The government backs EPF, ensuring it's a safe investment. It earns interest, helping your savings grow over the years.

• Tax Advantages: Your contributions are tax-deductible under Section 80C. Plus, the interest earned and the amount you get at the end are both tax-free.

• Withdrawals and Loans: You can withdraw from your EPF account for specific purposes before retirement, and you can also take loans against it.

Recent Updates:

• Interest Rate Hike: The interest rate for EPF has been raised to 8.25% for the year, the highest in the last three years​.

• Minimum Pension: The government has maintained a minimum pension of ₹1,000 per month under the Employees’ Pension Scheme (EPS), a part of the EPF​.

Remember, understanding your investment options is crucial for making informed decisions. EPF is a great tool for saving towards your retirement while enjoying tax benefits.

Stay informed, and see you next week for more insights!

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Weekly Quiz

A quiz that will have 4 questions, one every week, all linked together by a certain theme.
Write back to us guessing the answer and the theme. A lucky winner who guesses all four questions and the theme correctly will get a free hamper from us.

Quiz Question

This company was founded in 1975 and is headquartered in Kolkata. It is the ninth largest employer in India. But it also holds the uncomplimentary standing of being listed amongst the Top 20 firms responsible for a third of all global carbon emissions.

Name the company and guess the theme.

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On another note, our partner bank Shivalik SF Bank has recently increased its rates and currently offers the highest rate on our app at up to 9.20% p.a.

Best,
Team Stable Money

Disclaimer: This content is for educational purposes, based on data from sources like ET-Money, and Times of India, along with recent updates from Mint.