The Most Authentic Guide on Personal Finance and Investments


Words of Wisdom : "No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." ~ Warren Buffett

New Year Gift from EPFO

Employees Provident Fund Organisation (EPFO) proposes to pay a higher interest rate for the year 2013-14. 

The Central Board of the Trustees of EPFO is recommending to the Ministry of Finance to pay 8.75% interest on the employee provident fund for 2013-14. This will be 0.25% higher than the interest of 8.5% paid for 2012-13 and 0.5% more than 8.25% paid for 2011-12.

If approved, this would be a great relief to millions of subscribers of the provident fund, especially in a year when persistently high inflation has made life difficult for the aam aadmi.

Provident Fund is an excellent product...
...Since the amount is automatically and compulsorily deducted from the salary, it ensures disciplined saving
...There is a matching contribution from the employer
...The interest rate varies every year in line with the prevailing rates in the market and thus provides a reasonable protection against inflation
...Interest income is totally exempt from tax (up to the rate specified by the Govt.)
...There is no tax even on withdrawal (except when you withdraw the money prior to completing five years of continuous service)
...It is a highly safe investment (unless the employer defaults in making mandatory deposits)
...It allows partial withdrawal for important requirements such as medical exigencies, children's education / marriage and house purchase.

Given these benefits, it is always recommended to maximize one's savings in EPF. 

As you would be aware, the minimum mandatory amount deducted and deposited in the PF account is 12% of your basic salary + dearness allowance. Employer too has to compulsorily match this amount and deposit in your account.

However, you can voluntarily deposit (called VPF) more amount up to a maximum of 100% of your basic salary + DA. 
a) VPF will be only your contribution. The employer is not required to match this extra deposit made by you. 
b) Such requests for voluntary contributions have to be generally given at the beginning of the year
c) VPF cannot be stopped in mid-year.
d) It will be considered for the Rs.1 lakh limit u/s 80C. 

The recent steps taken by EPFO to provide online facility for most transactions related to your PF account has removed the big stumbling block in managing one's PF account and is wholeheartedly welcomed.

So go ahead and make the most of this less-appreciated wealth creator.

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