Employee’s Provident Fund(EPF) and Public Provident Fund(PPF) are always the preferred choices of investors due to the inherent benefits it provides. It provides sovereign guarantee and tax-free returns to its investors. While almost every Indian national staying in the country can invest in Public Provident Fund, it is not the case with the Employees Provident Fund(EPF). As the name suggests, it is meant for the social security of the employees. There are certain criteria that decide your eligibility as an investor of the Employees Provident Fund(EPF).
Eligibility Criteria For Employees’ Provident Fund Users
If you do not have a PF account yet, below are eligibility criteria for the employees for having a Provident Fund account.
- If your salary is less than Rs 15000, it is mandatory to join the Employees’ Provident Fund Organisation.
- Even if your salary is more than Rs 15000, you can become an EPFO member, but you need the permission of your employer and the Assistant PF commissioner.
- Organizations having more than 20 employees are obligated to join EPFO and become PF contributors.
- For organizations with less than 20 employees, it is not mandatory, but you can voluntarily become EPFO members.
Benefits of Provident Funds
If you do not have a PF account yet, you might be wondering about the benefits of having a PF account. A very prominent part of a working professional’s investment portfolio is the Provident Fund account. Employee Provident Fund acts as a cushion for the employee for times of emergency. It is always recommended for all working professionals to have a PF account.
The following are some of the significant benefits of having a Provident Fund account.
This is a significant benefit of Provident Funds. A PF account can be used as a guaranteed source of funds when it comes to significant life events like education or marriage. Provident fund has a feature where the employee can withdraw the PF balance in case of inevitable circumstances after a fixed number of months of employment. Liquidity value of this investment instrument makes it a must-have on your investment portfolio for a safe investment option
Tax Saving Scheme
It is important to note that the amount invested in Employee Provident Fund is non-taxable. The interests earned from Provident Funds are also exempted from taxes. Hence, this is a profitable investment instrument because the employee is saved from paying taxes on the part of his salary and interest earnings. This is a good investment instrument to save the tax on interest-earning.
Life Insurance Scheme
A portion of the Provident Fund balance is contributed by the company of the employee. A part of the employer’s contribution goes to the life cover which this scheme provides. In case the employee passes away during their service period, the family is eligible to claim Rs 2.5 Lakhs. This was recently revised and increased from the previous amount of Rs 1.5 Lakhs.
As we know, the employer also contributes to your PF balance; a part of this contribution is also saved as a pension plan for the employee. This is the amount that is collected for the employee’s retirement. A portion of the employer’s contribution is added to this plan every month, making it easier for the employee to plan their investment portfolio accordingly.
Provident Fund is a very reliable investment option for the employee. There are zero risks since the government backs the scheme. This investment option provides significant fund security, which is the best feature of this investment instrument.
These are some of the crucial benefits of the Employees’ Provident Fund one must consider before getting a PF account. Other than a PF account, there are other similar secure investment options like Bajaj Finance fixed deposit or nationalized banks’ FD. This is a good investment option because along with most of the benefits of Provident Funds, it also provides a high liquidity value which might work in your favor during emergencies. Investment schemes might look tricky but if you take care of factors like interest rates, liquidity value, tax saving schemes, and other benefits it will be easier to figure out what is best for your financial plan.