People doing private jobs deposit a part of their salary in EPF account every month. The employer also contributes the same amount to the employee’s EPF account. This creates a large fund in the long run. This amount is given to the employee after retirement. The money deposited in EPF is not only useful after retirement, but also helps you in many ways before.
Financial security
The first advantage of depositing large amount in EPF is financial security. You know that after retirement you will get a big unit fund. This makes you feel financially safe. If you have any outstanding financial responsibility, you can fulfill it with this money. Interest is received on funds deposited in EPF. It is calculated on a compound basis. This keeps your money increasing year after year.
Government determines interest rate every year
The government determines the interest rate every year on the funds deposited in the EPF. The government has fixed the interest rate of 8.25 percent for FY 2024-25. While the maximum interest on bank FD is between 6.5-7 percent, 8 percent interest can be considered very attractive. Such more interest is hardly available in another fixed return investment scheme. The rupee deposited in EPF increases well due to high interest rates.
Also take advantage of tax deduction
The benefit of tax deduction is also available on the employee’s contribution to the EPF account. Under Section 80C of the Income Tax Act, 1961, if your total contribution to EPF account in a financial year is Rs 2.5 lakh or less, the interest earned on it is tax-free. However, if the contribution is more than Rs 2.5 lakh, the interest earned on the additional amount will be taxable.
Useful even in emergency situations
The money deposited in EPF also acts as an emergency fund for you. EPFO rules allow the employee to withdraw some funds from the funds deposited in the EPF in many situations. For example, some of the amount deposited in EPF can be withdrawn for the treatment of son/daughter or brother/sister. In the event of unemployment, the employee can withdraw funds deposited in his EPF account. Money can be withdrawn for higher education of children.
