Employee Provident Fund (EPF) is one of the most tax friendly retirement tool. It gives tax benefit under section 80C of the Income Tax and if an employee continues the account for 5 consecutive years then withdrawal is totally tax exempted. The interest rate for the financial year 2014 is 8.75 per cent for EPF which yields more or less equal returns as any other other debt products available in the market. We take a quick look into 5 benefits of having an EPF account.
Contribution to EPF qualifies for pension benefits
The entire contribution of the employee and 8.33% of the employer's contribution goes to EPF. It provides pension to the member as well as to family in the unfortunate death of the member, subject to certain prerequisites. For receiving the pension benefit, the member should be 58 years of age and should complete 10 years of service without any withdrawal.
EPFO provides insurance benefit under EDLI
EPF also gives you an insurance cover of a nominal sum assured value of maximum of Rs 1.3 lakhs. The insurance cover is granted as a part of Employee Deposit Linked Scheme (EDLI). Under this cover, the dependent gets money if the member meets an unfortunate death.
Withdrawal benefit is also available in EPFO
An employee can withdraw from EPF account for some specific purpose or in case of emergencies like marriage, medical treatment, education, purchasing of dwelling home, repayment of housing loan etc. If an employee withdraws after 5 years of continuous service then the interest as well as the amount withdrawn is exempted from tax.
EPF provides tax benefit
EPF provides tax benefit under section 80C. Bank fixed deposits may offer higher interest rates but are not tax exempted.
Death Benefit is provided by EPF
In cases of unfortunate death of the member, the dependents of the member will get the amount accumulated in the fund. The member must choose a nominee to get this benefit.