In a recent move, the Employees’ Provident Fund Organization (EPFO) has cut interest on the PF account for the financial year 2021-22. Now subscribers will get interest at the rate of 8.10% instead of 8.5% on the amount deposited in the PF account.
PF account is one of the largest saving schemes in the country. Every month a portion of the money is deducted from the salary of the employee which goes to the PF account and the equivalent contribution is made by the employer as well. On this accumulated amount government pays an interest decided by the Central Board of Trustees. After retirement or in between this money can be used by subscribers. Now, the interest rate has been slashed down for this scheme. Despite the recent rate cut, it is still the best saving scheme. In this article, we are telling you about the benefits of a PF account.
Offers the highest rate of interest:
EPFO may have cut the interest on the PF account for the financial year 2021-22, but even after this, the interest rate offered in the scheme is higher than other savings schemes like NSC, FD, RD, Sukanya Samridhi, etc. In such a situation, you will get more interest on whatever money you deposit in it.
Subscribers of this scheme get by-default insurance as soon as they open a PF account. Under the Employees’ Deposit Linked Insurance scheme, the subscriber gets insurance up to Rs.6 lakh. EDLI provides for a lump sum payment to the designated beneficiary of the insured in case of death due to natural causes, illness, or accident. The objective of this scheme is to provide financial security to the family member after the death of the employee. This benefit is given to the employee by the company and the central government.
PF is one of the most common and best options to save tax. Under the old tax regime system, you will get a tax exemption of up to 12% of the salary contribution. This savings is tax exempted under section 80C of the Income Tax Act.
Under the EPFO Act, 12% of the basic salary plus DA to the employee goes to the PF account. So at the same time, the company also contributes 12% of the basic salary plus DA of the employee. Out of the 12% contribution of the company, 3.67% goes to the PF account of the employee and the remaining 8.33% goes to the employee pension scheme.
Interest paid on idle account:
PF account holders also get interest on idle accounts. If your PF account is inactive for more than 3 years, then too you will continue to receive interest. This change has been made by EPFO in 2016.
In view of the pandemic and unemployment, the government has given the facility to withdraw some money before retirement. You can withdraw money from your PF fund at any time of need. If the employee completes 5 years of service in any company and withdraws PF, then there is no income tax liability on him. 10% TDS and tax is deducted on non-completion of 5 years period.