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Providence of Funds

I have long wondered about the EPF (Employee Provident Fund) and PPF (Public Provident Fund) options and benefits from them, though I have been investing in them regularly all my work life. There is also no single comprehensive source on the internet which clarifies various questions that one may have on the topic. So today I went about Googling, and found answers to many of my questions. Collating them here, just in case it is of a few pennies worth to someone else.

EPF is contribution of a fixed % of one’s basic salary (matched by an equal contribution by the employer only for salary above 60k upto a maximum of 12%) to the government savings account. It earns an interest of 8.5% per annum ( decided by government every year in the Union budget), paid out quarterly, which by today’s standards is higher by atleast 150 bps the interest paid out on vanilla deposits. Also, it is a forced saving that can come to your aid in your twilight years. Though I clearly recognize it as a good investment option, some of the questions that have niggled me are when can it be withdrawn, what about movement to a different organization, different state, different country etc. Will try to address as many here as I have come across.
1. One can withdraw it 5 years post employment without losing interest and without tax.
2. Withdrawal post 2 months of leaving an organization (with tax) is also possible.
3. It is advisable to get it transferred to the new organization’s pf through usage of Form 13 (specific form available with employer) so that it is all consolidated. Though failing to do so does not lead to any loss of interest earning.
4. It can be transferred to any state within the country except J&K. There are no international EPF schemes.
5. One can also avail of loans on the basis of EPF savings.

The public provident fund , on the other hand, is an investment that is optional in nature. It is tax free subject to certain terms and conditions, that may vary by individual choices of other investments. It is repayable 15 years post account opening, and this can be extended by another 5 years. It pays out an interest at 8% per annum, and computed on the 6th of every month for the remaining balance. A maximum tax free investment of 70000 is allowed in PPF per year. A 100Rs minimum investment is required every 2 years into the account to ensure that it continues to earn interest.

Filed under: Drama in real life, Work - the economics and trends

June 2017
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