Insurance to pension — 5 benefits of PF account that you must know
An employees’ Provident Fund (PF) account is generally considered a retirement-oriented investment option, which is mandatory for each and every employee who fulfills ₹15,000 threshold for monthly PF contribution. An employee gets income tax exemption under Section 80C of the income tax act on one's PF contribution up to ₹1.5 lakh in single financial year. However, there are various other benefits that Employees' Provident Fund Organisation (EPFO) envisages for its members. These PF benefits include free insurance and pension benefits too.
Speaking on the PF account benefits beyond income tax exemption and retirement fund accumulation SEBI registered tax and investment expert Jitendra Solanki said, "An employee needs to look at one's PF account beyond a retirement fund accumulator and an income tax saver. In fact, there are various other benefits that a PF account must know and should pass it on to others who also have PF account or an EPFO subscriber."
Asked about the 5 PF account benefits beyond income tax Jitendra Solanki listed out the following:
1] Free insurance: A PF account holder by default becomes eligible for free insurance up to ₹7 lakh in case of death during the service period under EDLI scheme. Earlier, the death cover for PF account holder was ₹6 lakh but now it has been enhanced up to ₹7 lakh. Most importantly, the PF account holder need not to pay any insurance premium for this death cover provided under the EDLI scheme.
2] Pension provision: A PF account holder is eligible for pension after 58 years as well. However, to become eligible for pension, there has to be minimum 15 years regular monthly PF contribution required in one's PF account. The pension benefit comes from the employer's contribution as 8.33 per cent of its contribution (out of 12 per cent) goes to the EPS account of the PF account holder.
3] Loan against PF: In the case of financial emergency, a PF account holder can take loan against one's PF balance and the PF loan interest rate levied is only 1 per cent. The loan will be short term in nature and has to be repaid within 36 months of loan disbursal.
4] Partial withdrawal during emergency: EPFO allows partial withdrawal in case of medical or financial emergency subject to some terms and conditions.
5] Home loan and hole loan repayment: One can use one's PF account for home loan repayment. As per the EPFO rules, one can withdraw up to 90 per cent of the PF balance for buying a new home or constructing a home. One can buy land as well using one's Pf balance.
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