EPF as many know it as a retirement-oriented scheme is also a good low-risk investment instrument with returns much higher than bank deposits. What you might not know is EPF comes with several benefits including,
1. Loan Or Advance Against EPF
An EPF loan actually is an early withdrawal from your account. The advance toward your EPF comes interest-free and it doesn’t have to be paid back either. You can either withdraw it partially or fully. Know more about the conditions here.
2. Free Insurance Coverage
Employees Deposit Linked Insurance Scheme (EDLI) is an insurance cover provided by the EPFO (Employees Provident Fund Organisation) for private sector salaried employees. As a contributing member of the EPF, you are automatically eligible for this insurance coverage.
The registered nominee gets a lump-sum amount in the event of the death of the insured member, during the period of their service. EDLI scheme works in combination with EPF and EPS. Here’s how it works.
3. Pension At Retirement
EPFO introduced the Employees’ Pension Scheme (EPS) in 1995 to make it possible for salaried employees to get a pension after their retirement at the age of 58 years.
As discussed earlier, you and your employer contribute 12% each of your monthly basic salary plus DA towards your EPF. While your entire share is contributed towards EPF, 8.33% of the employer’s share goes towards the EPS and 3.67% goes towards EPF every month.
One must have completed a total of 10 years of service with or without gaps in their employment and be over the age of 50 to receive an early pension and 58 years for a regular pension. If you postpone the pension for 2 years until you turn 60 years, you will be eligible to receive the pension at an additional interest of 4% per year.
4. Builds Savings Hassle-Free
Since the EPF gets deducted directly from your salary every month, you don’t have to make an extra effort to save money. Since EPF balance is tax-free and earns more interest than any other savings options in the market, it grows to a sizeable amount at the end of your tenure. It’s a good low-risk investment option working towards your retirement.
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