For workers in small

The most significant tool in the arsenal of retirement planning is the Employee Provident Fund. When kept for long-term, it can not only meet retirement goals but also surpass them because:

    It has 100% tax-free interest
    Interest works on compound growth

Both these factors ensure that on the time of maturity PF provides a substantial nest egg. Illustrated below are all the advantages an EPF affords a person and their loved ones in times of need, emergency or after retirement.

What are the merits of Provident Fund?

    Insurance

The Employee Deposit Linked Insurance scheme states that a company has to contribute 0.5 % of the monthly basic pay as a premium of insurance cover. EDLI is applicable when the organisation doesn't give its employees a group insurance scheme. The contribution of the employer is capped at Rs. 6,500. Furthermore, the insurance coverage amount is the higher one of the following two:

    Twenty times the average wages of the past one year (up to Rs 6,500 per month) which comes out to be Rs 1,30,000.
    The full amount in the PF account (up to Rs 50,000) plus 40% of the balance amount.

For workers in small enterprises, the sum EDLI produces is, at times, more than enough for survival.

    Pension

EPF comprises of two elements:

    Provident Fund
    Employee Pension Scheme

The latter was introduced in 1995. While the contribution of the employee, which is 12% of basic pay plus DA, goes entirely to PF, the input of the employer is divided. Out of the 12% the company has to give, 8.33% is deposited into EPS. This is capped at Rs.541. The balance amount is added to the PF.

When a person retires, they receive a pension which is dependent on:

    The median salary they in the year prior to retirement
    The number of years they have worked

What this signifies is that the contribution to EPS, over the years, builds a substantial corpus as a pension. Due to a provision under the law, one can receive the EPS along with PF in lump sum amount. To collect a pension, one must:

    Be 58 years old or over
    Completed a decade of service without any withdrawals from it

In case an employee retires before reaching the age of fifty-eight, they can still collect the pension just at a lessened amount. Furthermore, on the passing of a worker, the family is entitled to the pension as along as set conditions are met.

It should be noted that there is a limit to the maximum amount of pension for each month - Rs. 3,500. There is a simple technique to bypass this limit if the employer uses the actual pay of the worker for contribution instead of the specified Rs. 6,500 per month.




The most significant tool in the arsenal of retirement planning is the Employee Provident Fund. When kept for long-term, it can not only meet retirement goals but also surpass them because:
  1. It has 100% tax-free interest
  2. Interest works on compound growth
Both these factors ensure that on the time of maturity PF provides a substantial nest egg. Illustrated below are all the advantages an EPF affords a person and their loved ones in times of need, emergency or after retirement.What are the merits of Provident Fund?
  • Insurance
The Employee Deposit Linked Insurance scheme states that a company has to contribute 0.5 % of the monthly basic pay as a premium of insurance cover. EDLI is applicable when the organisation doesn't give its employees a group insurance scheme. The contribution of the employer is capped at Rs. 6,500. Furthermore, the insurance coverage amount is the higher one of the following two:
  1. Twenty times the average wages of the past one year (up to Rs 6,500 per month) which comes out to be Rs 1,30,000.
  2. The full amount in the PF account (up to Rs 50,000) plus 40% of the balance amount.
For workers in small enterprises, the sum EDLI produces is, at times, more than enough for survival.
  • Pension
EPF comprises of two elements:
  1. Provident Fund
  2. Employee Pension Scheme
The latter was introduced in 1995. While the contribution of the employee, which is 12% of basic pay plus DA, goes entirely to PF, the input of the employer is divided. Out of the 12% the company has to give, 8.33% is deposited into EPS. This is capped at Rs.541. The balance amount is added to the PF.When a person retires, they receive a pension which is dependent on:
  1. The median salary they in the year prior to retirement
  2. The number of years they have worked
What this signifies is that the contribution to EPS, over the years, builds a substantial corpus as a pension. Due to a provision under the law, one can receive the EPS along with PF in lump sum amount. To collect a pension, one must:
  1. Be 58 years old or over
  2. Completed a decade of service without any withdrawals from it
In case an employee retires before reaching the age of fifty-eight, they can still collect the pension just at a lessened amount. Furthermore, on the passing of a worker, the family is entitled to the pension as along as set conditions are met.It should be noted that there is a limit to the maximum amount of pension for each month - Rs. 3,500. There is a simple technique to bypass this limit if the employer uses the actual pay of the worker for contribution instead of the specified Rs. 6,500 per month.


Article Source: http://EzineArticles.com/10109235

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