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The most important tool in the retirement planning arsenal is the Employee Provident Fund. When held long-term, you can not only meet your retirement goals but also exceed them because:

  1. It has 100% interest tax free

  2. Interesting works on compound growth

Both factors ensure that at maturity, PF provides substantial savings. Here are all the benefits that an EPF offers a person and their loved ones in times of need, emergency or after retirement.

What are the merits of the Provident Fund?

  • Sure

The insurance plan linked to employee deposits establishes that a company must contribute 0.5% of the basic monthly salary as a premium for the insurance coverage. EDLI is applicable when the organization does not offer its employees a group insurance plan. The employer contribution is capped at Rs 6,500. In addition, the amount of insurance coverage is the greater of the following two:

  1. Twenty times the average salary in the last year (up to Rs 6,500 per month), which turns out to be Rs 130,000.

  2. The total amount in the PF account (up to Rs 50,000) plus 40% of the balance amount.

For small business workers, the amount EDLI produces is sometimes more than enough to survive.

  • Pension

EPF composed of two elements:

  1. Provident fund

  2. Employee pension scheme

The latter was introduced in 1995. While the employee’s contribution, which is 12% of base salary plus DA, goes entirely to PF, the employer’s contribution is divided. Of the 12% that the company has to give, 8.33% is deposited in the EPS. This is capped at Rs 541. The balance amount is added to the FP.

When a person retires, they receive a pension that depends on:

  1. The average salary they had in the year before retirement.

  2. The number of years they have worked.

What this means is that the contribution to the EPS, over the years, builds a substantial corpus as a pension. Due to a provision of the law, the EPS can be received together with the PF in a lump sum. To collect a pension you must:

  1. Be 58 or older

  2. Completed a decade of service with no retirements from it

In case an employee retires before the age of fifty-eight, he can still collect the pension only for a reduced amount. Furthermore, upon the death of a worker, the family is entitled to a pension as long as the established conditions are met.

It should be noted that there is a limit to the maximum amount of the pension for each month – 3,500 rupees. There is a simple technique to circumvent this limit if the employer uses the worker’s actual salary for the contribution instead of the specified Rs 6,500 per month.

  • Unique Situations

One of the main supports that a person obtains by registering PF online is a financial cushion during difficult or extraordinary times. When an emergency arises and there are no saved funds or help available, it can be withdrawn from the EPF. To dive into the corpus, some conditions must be met and a specific boundary must be crossed. Some examples of when EPD can be useful are:

  • A medical emergency:

For any major surgical operation or conditions such as cancer, tuberculosis, leprosy, heart disease, mental problems, and paralysis, a person can withdraw money from EPS. The amount that can be taken has to be less than the following two:

  1. 6 times the person’s salary

  2. Total contribution made to the EPF to date

The fund drawn can be used to treat the spouse, children, oneself or dependent parents.

  • Any life goal

A parent plans a child’s education and marriage, a person might want to give their brother a higher education, or a person might want to study more. These are all life goals that can be financially supported through EPF. An employee can withdraw approximately half of the contribution for the marriage or education of a child, himself or a brother.

This can be done up to three times in its lifespan. The only criteria that must be met are:

  1. Valid document proving marriage or fee payable to the university

  2. He spent seven years in service

  • House of your dreams

When an employee wants to build a new house, repair or maintain an old one, he can use the money in EPF. It can also be appropriate for the payment of mortgage loans. The association specifies the contingencies that must be met for it. The usual few are:

  1. For the payment of the home loan, the salaries of three years of the EPF can be used as long as 10 years of services have been completed.

  2. For home repair or modification, wages equal to twelve months can be withdrawn. This requires an existing house and can only be done once. For alteration, the person has to complete 5 years of service and for repair 10 years.

  3. To buy a new home, an employee only needs to work for five years. The amount withdrawn can be used to purchase a new house or land and the construction of a new house. If a piece of land is bought, the total that can be obtained is 24 months’ salary. For a house, the amount can be 36 months of salary. This amount can be collected only once in a lifetime. The house or lot can be in the name of the employees, in the name of the spouse or jointly owned.

The advantages of EPF are not limited to those explained above. There are a few other circumstances in which it can be used, such as:

  1. Damage from natural calamities

  2. Purchase of equipment for the physically handicapped

  3. If the person changes jobs and remains without a profession for more than two months

Nominating a family member to receive the EPF corpus in the event of an employee’s death is an excellent safety net.

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