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.
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.
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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.
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 Additionally, the maturity amount is tax-free if withdrawn after five years of continuous service, making EPF a tax-efficient savings tool.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,
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