Friday, 29 April 2011

P F Deduction Makes You Rich when Retire

Provident Fund deduction may make you rich when you retire from service. The Cumulative power of 9.5% Tax free interest makes grow your money year after year. Provident Fund (P.F) or Employees Provident Fund is a compulsory deduction from your salary. 12% of your Basic Salary and D.A will be deducted from your salary every month. If you are a private employee the same amount will be invested by the employer to Employees Provident Fund Account. When it is deducting, you may feel that it reduces the take home salary. But this for a good cause and you will get 9.5% (as per the present rule) interest for your Provident Fund Balance and this interest is Tax free also. When the money deduct from your salary for Provident Fund you will get tax exemption under section 80C of the present Income Tax Rule. Then you are getting a tax free compound with for your tax saving investment.

As per the present Income Tax rule Provident fund is Exempt Exempt Exempt (EEE) investment. When the amount deducted from your salary that part is exempted from income tax and when you get interest the interest income of PF also exempted from income tax and when you get back the money from Provident Fund at retirement that portion is also exempted from income tax.

Recently a website reported that if you have a salary of Rs. 25000 (basic salary and Dearness allowance) and if the person has a service period of 35 years, he will get back around Rs. 2.4 crore when he retire (with a compound interest of 8.5%) and the provident fund can make you a crorepati at the time of retirement. Yes the statement is correct and the employee can retire as a crorepati with his provident fund account. It is the power of compound interest and regular investment.

But for attaining this goal you should not withdraw your provident fund before your retirement. So let the provident be untouched till your retirement unless otherwise any unavoidable circumstances. If you withdraw earlier the compounding will not work effectively. When you change your job form one employer to another you can transfer your provident fund account to your new provident fund account and now the EPFO is trying to make is easier through online. Just fill Form 13 for transfer your PF account form old PF account to New PF account.

You can invest additional amount in Provident Fund by depositing Voluntary Provident Fund (VPF) and can enjoy the same benefit of Provident fund deposit.

So never make any untimely withdrawal from provident fund account. Try to deposit additional amount as VPF (Voluntary Provident Fund) and Transfer your PF account when you change your job, Earlier you could get same interest for the discontinued PF account and now it is not allowed. We wish all employees a rich retirement.

Related Posts
TDS from Premature Withdrawals of Provident Fund

Monthly Provident Fund Statement to all PF Subscribers

Transfer your old PF account with previous employer to new one

4 comments :

  1. I think the interest earned on PF [retained after retirement with the EPFO or PF trustafter retirement] is NOT exempt from income tax. You have mentioned that it is non-taxable. Can you please quote the relevant section in support of your assertion.
    Thanks

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  2. As per the earliest directions PF retained without subscription will not attract any interest. So the question about taxation is not arise. I mean the PF which earns interest during the subscription period (when the subscriber is working and PF amount is depositing without much interruption)

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  3. [...] Related posts Monthly Provident Fund Statement to all PF Subscribers Transfer your old PF account with previous employer to new one P F Deduction Makes You Rich when Retire [...]

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  4. [...] TDS from Premature Withdrawals of P F Transfer your old PF account with previous employer to new one P F Deduction Makes You Rich when Retire [...]

    ReplyDelete