The Employees Provident Fund Organization (EPFO) has announced that the rate of interest on EPF will remain 8.5 percent in the year 2020-21 as well. In the last financial year too, interest was paid at the rate of 8.5 percent only. Thus, of all the government-backed fixed income schemes that are currently running, the maximum interest is being paid only on the Employees Provident Fund. While the EPF offers high returns, the rules for withdrawal of funds from it are quite simple. When the customer retires, he is allowed to withdraw the entire amount deposited in the EPF. Even if he has to face unemployment for more than two months, he can withdraw the entire amount in the EPF. Withdrawal of some part of the money in the provident fund, ie partial withdrawal is also allowed, but some conditions have been kept for that.
Partial Withdrawal Conditions
Partial withdrawals are allowed to be withdrawn from the EPF for construction of houses, sudden treatment and other similar needs. Prashant Singh, Business Head (Compliance and Payroll Outsourcing), TeamLease Services, says, “About 95 percent of the advance withdrawal from EPF is for buying or buying a house. It also includes withdrawing money to buy a plot. According to the rule, the price of a house or plot is seen and 36 times the monthly basic salary and dearness allowance of the customer is taken out. Any amount less than the two can be withdrawn from the EPF account.
Employees can also withdraw funds from the EPF for treatment. In this, six times the monthly basic salary of the employee is taken out and his total contribution and interest is seen. Whatever amount is less than both can be withdrawn. For the marriage of a child, the employee can withdraw up to 50% of his total contribution, but it is necessary that he must have been working for at least 7 years.
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Apart from this, the employee can withdraw up to 50% of his total contribution for the education after 10th class of the child. If the house is to be repaired, then 12 times the monthly salary and dearness allowance is seen, the employee’s contribution and interest is seen or the total cost of the repair is seen. It is allowed to withdraw the same amount as the lowest of the three.
Many people make partial withdrawals even before retirement. If the age is 54 years, then you can withdraw up to 90 percent of the total deposits. Anil Lobo, independent advisor (Retirement and Employee Benefits), says, “Partial withdrawals of the total amount of PF are allowed up to one year before retirement. But the condition of age should be fulfilled for him. This has been done so that the employee can plan his / her life after retirement. ‘
COVID Advance
The infection of COVID-19 has disturbed the people of the whole country and EPFO is also watching the situation of this epidemic. Therefore, it had approved the customers to take a lump sum advance in March 2020 with an intention to alleviate the financial crisis caused by the epidemic, which did not even need to be returned. “75 per cent of the total deposit amount or whichever is less than the basic salary of the employee for three months could be withdrawn as advance,” says Singh. Lobo explains, “Although it helped a lot, some employees took advantage of this advantage unjustly.” He has availed this facility many times, leaving less money in his account.
After retiring
If you wish, you can leave funds in EPF account even after retirement. Tax and investment expert Balwant Jain advises, “The rate of return on EPF is very high and customers should use this option to take advantage of it.” But one thing has to be kept in mind here. Mumbai-certified financial planner Kiran Tailang says, “If an employee keeps his money in EPF account even after retirement, then he will get interest only for 36 months. After that you can leave your money in the account for any number of years, even a pie will not be added as interest.
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Jain speaks of another marque. He says that the tax method also changes in the interest income received on EPF. Jain explains, ‘As long as you are an employee, the tax on the income earned on EPF is not deducted. But as soon as you retire, the interest on your PF amount comes under the tax net. After that you will have to show this amount in your income tax return as an income item. But after retirement, you do not have approval for partial withdrawal from EPF account. Finally, use the provisions to withdraw funds from the EPF carefully so that you have enough money left after retirement.
Returns and taxes in popular fixed income schemes
Employee provident fund
Rate of Interest: 8.5%
Duration: Till retirement (can extend up to three years with interest accrual)
Tax: Tax on interest of contribution of more than 2.5 lakh rupees from 1st April
Senior Citizen Savings Scheme
Rate of interest: 7.4 percent
Duration: 5 years
Taxes: Section 80C benefit, tax on interest
Pradhan Mantri Vay Vandana Yojana
Rate of interest: 7.4 percent
Duration: 10 years
Tax: No benefit of Section 80C, tax on interest
Government of India Savings Bonds (Taxable)
Rate of interest: 7.15 percent
Duration: 7 years
Tax: TDS on interest income, TDS applicable while paying interest
Sukanya Samriddhi Account
Rate of interest: 7.6 percent
Duration: 21 years or 18 years from the date of account opening
On wedding
Tax: Income tax benefit under section 80C. Final amount tax free
Public provident fund
Rate of Interest: 7.1 percent
Duration: 15 years, which can be extended into five-year segments
Tax: Profit of Section 80C, Returns tax free
National savings certificate
Rate of interest: 6.8 percent
Duration: 5 years
Taxes: Section 80C benefit, tax on interest
