Know why its important to have Provident Fund account and 5 benefits it provides

The Provident Fund is mandatory for every employee who fulfills Rs 15,000 threshold for monthly PF contribution. It is generally considered a retirement-oriented investment option. Provident Fund, however other than being a long-term savings scheme gives several additional benefits to the subscribers.

Under Section 80C of the income tax act, an employee gets income-tax exemption on a PF contribution of up to Rs 1.5 lakh in a financial year. The Employees' Provident Fund Organisation (EPFO) provides various other benefits to its members.

5 benefits of EPF funds
A PF account holder can take a loan against their PF balance and the PF loan interest rate levied is only 1% if there is a financial emergency. Within 36 months of loan disbursal, the loan has to be repaid.

A PF account holder can withdraw up to 90% of the PF balance for buying a new home or constructing a home, as per EPFO rules. PF account can be used for home loan repayment. One can also buy land through PF balance.

Under the EDLI scheme, in case of death during the service period, a PF account holder by default becomes eligible for free insurance up to Rs 7 lakh and there is no need to pay any premium for the death cover. Previously, the death cover was Rs 6 lakh.

In case of a medical or financial emergency, EPFO allows partial withdrawal but is subjected to some terms and conditions.

A PF account holder is eligible for pension after 58 years as well. However, to become eligible for the pension, there has to be a minimum of 15 years of regular monthly PF contribution in one's PF account. The pension benefit comes from the employer's contribution as 8.33% of its contribution goes to the EPS account of the PF account holder.

Source : DNA India