The Employee Provident Fund (EPF) is one of the most widely-used investment schemes by the salaried class in the country. The benefits of EPF are extended to all establishments with 20 or more employees. Unfortunately, the past few years have seen the interest rate on it steadily fall, hitting a five-year low of 8.55% in 2017-18. But the buzz is that this year won't see a further dip - the rate is expected to hold steady - given the upcoming general elections, which is great news for the over six crore subscribers of the Employees' Provident Fund Organisation (EPFO).

1. 1
THE IMPORTANCE OF PROVIDENT FUND WITH REFERENCE
TO INDIAN CONTEXT
VARUN KESAVAN, RESEARCH SCHOLAR, E – MAIL ID – varunkesavan@yahoo.com
The Employee Provident Fund(EPF) is one of the most widely-used
investment schemes by the salaried class in the country. The benefits of EPF
are extended to all establishments with 20 or more employees. Unfortunately,
the past few years have seen the interest rate on it steadily fall, hitting a five-
year low of 8.55% in 2017-18. But the buzz is that this year won't see a further
dip - the rate is expected to hold steady - given the upcoming general
elections, which is great news for the over six crore subscribers of the
Employees' Provident FundOrganisation (EPFO).
The merits of having a PF account
Tax benefits
Apart from the fact that an employee's contribution towards an EPF account is
eligible for tax exemption underSection 80C, the interest rate earned is exempt
from income tax. According to experts, your EPF account continues to earn
interest even if it has been lying dormant for more than 3 years. Also, EPF
withdrawals are not taxable after five years of continuous service, unless the
employerterminates his/herbusinessor the employee voluntarily quits his/her
job.

2. 2
Lifelong pension
While employers and employees both contribute 12% of wages in EPF, 8.33% of
the employer'sshare is diverted towards the Employees'PensionScheme(EPS).
According to the retirement fund body, 10 years of contributory membership
ensures lifelong pension under Employees' Pension Scheme 1995.
Insurancebenefit
Then there are the benefits promised under the Employees Deposit Linked
Insurance (EDLI) Scheme, which is an insurance cover provided by the EPFO.
The registered nominee will receive a lump-sum payment in the event of the
death of the person insured, during the period of the service. Last February,
EPFOenhancedthe minimumassurance limit underthis scheme to Rs 2.5 lakh,
upfrom Rs 1.5 lakh previously. The maximum assurance benefit is capped at Rs
6 lakh.
Any employee who has an EPF account automatically becomes eligible for this
scheme but he/she does not need to make any contribution towards it. On the
other hand, the contribution of an employer stands at 0.5% of the basic salary
or a maximum of Rs 75 per employee per month. If there is no other group
insurance scheme, the maximum contribution is capped at Rs 15,000 per
month.

3. 3
Premature withdrawal option
While EPFO strongly advises against treating PF money as a bank account -
after all, the social security benefits accrue only when continuity is maintained
- the body allows its members to make partial withdrawals after 5-10 years of
service for meeting specific needs including medical treatment, home loan
repayment and unemployment.
For instance, up to 50% of an employee's share of contribution to the EPF can
be withdrawn formarriage or education purposes andan amountup to 36 times
the monthly wage plus dearness allowance can be withdrawn for house
construction. EPFO also allows withdrawal of up to 90% of the accumulation in
the PF account for repaying a home loan.
Last year, the retirement fund body also gave its subscribers an option to
withdraw upto 75% of their total PF balance afterone monthof unemployment.
This will be a non-refundable advance, which means that a member can
withdraw money without closing his account. Members would also have an
option to withdraw the remaining 25% of their funds and opt for a final
settlement of their accounts after completion of two months of unemployment
under the new provision. Alternatively, they can choose to retain their account
with the EPFO, which can be used after finding another job.

4. 4
Higher returns
That's not all. There is also the possibility of higher returns on your PF kitty in
the future. The EPFOinvests 5-15%of its investible deposits in exchange traded
funds (ETFs). However, the ETF investments do not reflect in members'
account and they do not have an option to increase the proportion of their
retirement savings to be invested into stocks. Furthermore, 45-50% of the PF
kitty has to be invested in government securities, 35-45 per cent in debt
instruments and 5% each in money market instruments and infrastructure
trusts. That is why the annual return on PF savings is much lower than that
offered by NPS, which offers more aggressive investing options.
However, the EPFO has been working on a software that would help show
retirement savings in cash and ETF components separately. The next big leap
from there would be to give members an option to increase or decrease
investments in stocks as per individual risk appetite. In fact, the EPFO's apex
decision making body, the Central Board of Trustees, has already suggested
exploring suchpossibilities. Hence,goodthings couldbe in store for subscribers
in the year ahead.