The interest levied on loans against PF balance is 1 per centThe Employees’ Provident Fund (EPF) is one of the most widely used investment tools by salaried people. The EPF, popularly known as simply the PF, is a government-backed savings scheme for employees of the organised sector. Considered a post-retirement or social security scheme, most establishments have to extend this facility to their employees. Employees and employers both contribute to the fund, which is handled by the government and, ultimately, withdrawn by the individual on her/his retirement. The individual earns interest on the sum accumulated in the fund over a period of time.Other benefits of opening a PF account are:1. LoansIndividuals can take loans against the money already accumulated in their PF accounts. The interest levied on loans against PF balance is 1 per cent, and the money has to be repaid within three years of the date of loan disbursal.2. Tax BenefitsThe employee’s contribution towards the PF is eligible for tax exemption under Section 80C of the Income Tax Act. Additionally, the interest earned on the amount deposited is also exempted from income tax. Some experts say the account holder earns interest even if the PF account is lying dormant for more than three years. EPF withdrawals are not taxable after five years of continuous service.3. Free InsuranceUnder the Employees’ Deposit Linked Insurance (EDLI) scheme, a nominee or legal heir of an active EPFO member gets a lump sum payment of up to Rs. 7 lakh in case of death of the member during the service period. All organisations covered under EPF and Miscellaneous Provisions Act, 1952, get enrolled for EDLI automatically.4. PensionA PF account holder is also eligible for pension after 58 years of age, but the person has to contribute regularly (monthly) to the PF account for at least 15 years. While employers and employees both contribute 12 per cent of the wage to the EPF, 8.33 per cent of the employer’s share is diverted towards the Employees’ Pension Scheme (EPS).5. Premature withdrawalThe EPFO allows members to partially withdraw after 5-10 years of service to meet specific needs including medical, home loan repayment, and unemployment.
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