Benefits of having Provident Fund Account in India
The Employees Provident Fund Organization (EPFO) provides PF facility to all employees. For this, a small portion of the employee’s salary is deducted for depositing to the PF account. It’s a way to secure an employee’s future after retirement. After retirement, this same deposit is useful to the employee. But did you know that not only in old age, but also PF account holders get many more benefits having PF account. The various benefits are available on having PF account are described as under;
- Insurance (IDLI) As soon as an employee’s PF account is opened, it is then insured by default. Employees get insurance up to Rs 6 lakh under Employee Deposit Linked Insurance (EDLI). The nominee or legal heir of an active member of EPFO will get Up to Rs 6 lakh incase death of active PF account holder during the period of his service. These benefits are given to employees by the companies and the central government.
- Tax exemption under Section 80C of the IT Act. On the other hand, if you want a tax deduction, PF is the best option. However, you should also know that the new tax system does not have such a facility. While in the old tax system , investment in PF account is exempted from taxable amount. An EPF account holder can save up to 12% on salary under Section 80C of the Income Tax Act.
- Monthly Pension after retirement :- The 8.33% contribution credited to the PF account goes to the employee pension scheme, which is received as a pension after retirement. The pension is the biggest support for a person’s old age. For which the government also runs several schemes.
- Continue to earn Interest on inactive account:- As per the change in the law in the year 2016, interest is also paid on the inactive PF account of the employees. Interest is also paid on the amount which has been dormant in the PF account for more than three years. Formerly, there was no provision for interest on PF account that had been inactive for three years.
- You can withdraw money when needed: – A major feature of PF funds is that some money can be withdrawn from account in times of need. This facility available in certain cases such as construction or renovation of the self house property, education or marriage of the dependent children, critical illness to self or dependent and so on. This will help you avoid the possibility of a loan.