EPF Pension Scheme: For salaried persons, the Employees’ Provident Fund (EPF) is a key component of financial planning, but many are unaware of the valuable pension benefits tied to it. The EPF scheme not only helps employees build a retirement corpus but also provides a lifelong pension through the Employees’ Pension Scheme (EPS). This pension offers financial stability in retirement, with eligibility extending to those who contribute for a minimum of 10 years and reach the age of 58.
In addition to the pension, EPFO also offers life insurance and tax-saving benefits, making it a comprehensive support system for employees in the organised sector. Knowing how these pension benefits work, the eligibility criteria, and other essential details is crucial.
Read More: How to apply online for partial EPF withdrawal: A step-by-step guide
Key Benefits of EPFO
EPF (Employees’ Provident Fund)
The EPF is a mandatory retirement savings scheme where both employer and employee contribute 12% of the employee’s basic salary and dearness allowance each month. This fund accrues over time, earning interest, and is generally tax-free upon withdrawal if the employee has completed five years of continuous service. The current interest rate on EPF contributions, revised annually by the government, is 8.25% for FY 2023-24.
EPS (Employees’ Pension Scheme)
This is one of the key benefits employees get after they retire. Basically, a part of the employer’s contribution goes towards EPS, ensuring a regular pension income once the employee reaches the retirement age of 58. The pension amount is based on a formula that considers the average salary and the years of service. Employees are eligible for a full pension if they have contributed for at least 10 years.
Read More: How To Calculate EPF Interest For 2024: A Guide To Maximising Returns
EDLI (Employees’ Deposit Linked Insurance)
EDLI provides life insurance cover to EPF members without requiring any additional contributions. In case of the member’s death during employment, the nominee receives an insurance amount, which can go up to Rs 7 lakh, based on the employee’s last 12 months’ salary. This insurance cover is automatically available to all EPF members, offering much-needed security for their dependents.
Tax Benefits
EPF contributions qualify for tax deductions under Section 80C of the Income Tax Act. Additionally, the maturity amount is tax-free if withdrawn after five years of continuous service, making EPF a tax-efficient savings tool.
Partial Withdrawals for Specific Needs
EPFO allows members to make partial withdrawals for specific purposes such as higher education, marriage, home loan repayment, and medical expenses. These withdrawals are allowed under certain conditions.
Eligibility for EPFO Membership
An employee must work in an organisation with 20 or more employees. Both Indian citizens and foreign nationals working in such companies are eligible for EPFO benefits. Employers are responsible for registering qualified employees with the EPFO, thereby ensuring that each employee is assigned a Universal Account Number (UAN). This UAN stays with employees throughout their careers, allowing them to transfer and manage their EPF balance across multiple jobs seamlessly.
Adhil Shetty, CEO of Bankbazaar.com, says, “Covering everything from retirement savings and pensions to life insurance and tax advantages, EPF is essential for employees. With options for partial withdrawals and easy digital access to account services, the EPFO has evolved into a convenient financial tool.”
The EPFO offers benefits tailored to support long-term financial security. It is important to keep this account active and continue saving through it for long-term benefits.
