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Employee Provident Fund : Withdrawing 1 lakh can create loss of 11 Lakh

Employee Provident Fund
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Employee Provident Fund

Mainly For long-term investment Employee Provident Fund EPF is considered a better option. As On deposit provides benefits of compound interest which interest on interest. Also after retirement, At the same time, after retirement, In your hand there will be a sufficient pension amount so that you can spend your old age smoothly.

So If you will withdrawal all amount in middle of your age then it will affects the amount which you will get in your old age after a long time. In such case just keep avoiding to withdraw any amount in the middle of your job from your PF account.

Discuss in Detail

Lets move on and make the situation more clear. At present PF offering the annual interest rate is 8.50% . Also you have left 30 more years for your retirement. But due to some condition you have withdrawal 1 lakh rupees from your PF account now. This 1 lakh rupees will have the value of 11 lakh after 30 years along with interest added. SO in this way withdrawing 1 lakh in middle you will have to face loss of 10.55 lakh rupees which you have supposed to get in your old age after 30 years.

According to Economic Experts

All the above mentioned situation will clearly shows that as long as your retirement period, the greater will be your loss. Just because on your deposit you will not getting any compound interest. Also some of the Economic expert also suggested not to withdraw the amount in middle. Which will be much better because the amount which you will get after retirement will includes the interest paid by EPFO. This epf withdrawal amount will also be completely tax free.

This EPF also comes under employees pension scheme

What is GPF

GPF: The full form of GPF is General Provident Fund. This facility is only available for employees working in government jobs.
In this very month the government employees deposit his/her 6 to 7% of his basic pay. They get this amount deposited by them at the maturity period. Means they get the money at the retirement period. In this way when a government employee retires with a sufficient amount in his/her old age.

Employee Provident Fund
Employee Provident Fund

At the interest rate of 7.1% quarterly the employee can withdraw some part of this deposited amount in PF in critical situations at the middle of his employment.

What is VPF

The full form of VPF is Voluntary Provident Fund. Its also a type of scheme same as GPF. Also this scheme have the same interest rates also. The employees having EPF deduction are only eligible for this scheme. As this scheme is only for such government employees.

The remaining part of salary after withdrawing of DA and 12% of basic salary in EPF. Along with the allowance This remaining part which is 88% of the basic salary, the employee will get every month.

The dearness allowance and 100% of the employee basic salary can also be deposited in VPF only if the employee wishes.
But for this facility an employee should have to talk themselves in their accounts department. Also according to section 80C The employee will get the tax rebate also annually upto to 1.50 lakh. In which the rate of interest will be 8.50%.

What is PPF:

The full form of PPF is Public provident fund. Its also epf scheme same as GPF and EPF. To avail the facilities of PPF there is no requirement of any job. In bank or in any post office anyone can able to open its pf accounts / PPF account under employees provident fund organisation and also can start depositing money in that every month or year..

In a year he/she can deposit maximum 1.50 lakh rupees and minimum 500 rupees. Also maturity period of this type of account is 15 years only. In this type of scheme, account holder can withdraw all his amount for child education or for any other emergency.

For this withdrawal the PPF account should be 5 years old. In this scheme the interest rate is 7.1% which is not fixed and could be changed according to the government norms and condition.

Some more points to keep in mind, while withdrwaing money from Employee Provident Fund

AS we all know the current situation. The corona pandemic effected all of us very badly. There are a lots of people among us who are now facing financial crisis due to this situation. So in such condition, Under Pradhan Mantri Garib kalyan Yojana, The Central Government can also withdraw the advance amount which is 75% from EPFO.

In such covid situation peoples are depositing money in their bank account by putting up the EPF claim. They are taking the advantage of this facility. As government declares about this facility people starts collecting money in their bank account within 15 days.

This total amount was above 9 lakh rupees and the number of claims were over 3.3 crores. This facility can also creates a loss for them but still peoples are taking full benefit of this facility.

SOme more Points can also be useful for Employee Provident Fund

  1. Can we take loan from Employee Provident Fund ?
    No, You cannot able to take such loans as there no such facility is available yet but you can in advance take the money from your deposited amount. Under certain conditions.
  1. COuld yopu deposit back the money you have withdrawn from you EPF account ?
    Yes you can. You can freely able to deposit you withdrawal amount but before retirement. Its not necessary that this money is deposit outright way.
  1. Also if you want to deposit a fix amount every month then you can also do this but if in case when the money has been withdrawn through online mode.
  1. How i can able to withdraw my PF if my company had closed my account?
    Yes you can transfer your money to your another account of your new company through online mode only if your KYC of that PF account is complete.
  2. Also if there is no transaction present in your account for 3 years and the company closed from long time. In such situation account can closed. In such condition you have to visit to your bank and get your pf balance with the help of your KYC.

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