Learn about your EPF and PPF in detail

Lets see each of PPF and EPF in detail . Both are providend fund benefits for retirement .

Employee Provident Fund (EPF)

The Employee Provident Fund, is a retirement benefit scheme that is available to salaried employees.Under this scheme, a stipulated amount (currently 12%) is deducted from the employee’s salary and contributed towards the fund. This amount is decided by the government.The employer also contributes an equal amount to the fund.

However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let’s say the employee decides 15% must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%.

You have landed on the most read article of this blog For this month , Make sure you Get updates on Email or Join Our Facebook Page

Other Points :

- Return on Investment: 8.5%

- If you urgently need the money, you can take a loan on your PF. You can also make a premature withdrawal on the condition that you are withdrawing the money for your daughter’s wedding (not son or not even yours) or you are buying a home.

- tax benefit under Sec 80C.

- The amount if withdrawn after completing 5 years in job will not be taxable.

Public Provident Fund (PPF)

The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.

You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 1997-98, the first loan can be taken during financial year 1999-2000 (the financial year is from April 1 to March 31).

The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. In this case, it will be March 31, 1998.

You can make withdrawals during any one year from the sixth year. You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

For example, if the account was opened in 1993-94 and the first withdrawal was made during 1999-2000, the amount you can withdraw is limited to 50% of the balance as on March 31, 1996, or March 31, 1999, whichever is lower.

If the account extended beyond 15 years, partial withdrawal — up to 60% of the balance you have at the end of the 15 year period — is allowed.

Other Points:

- The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.

- Return on investment : 8%

- tax benefit under Sec 80C , no tax on the maturity and no tax on interest earned.

- If you’re involved in a legal dispute, a court cannot attach or question the money in your PPF account.

Who should invest in PPF ?

Its mainly for people who are very conservative and cant take risk to great extent.

Any one who wants to invest for long term in some secure saving instrument must invest in PPF. To achieve long term goals there are many option like:

- Mutual Funds (Equity)

- Shares (Equity )

- PPF (Debt)

- Fixed Deposit (Debt)

- NSC (Debt)

- Others

Out of these , all under Debt catagory are safe. PPF is the most recommended if the investment horizon is very long like 15+ years.

Because of compounding you money will grow to a big amount.

I would be happy to read your comments or disagreement on any topic. Please leave a comment.

To get Free updates in Future, Subscribe to this Blog. Enter your email address

Post Footer automatically generated by Add Post Footer Plugin for wordpress.