For most of us who work on a fixed salary, a provident fund is not an unfamiliar concept. Every month before receiving the salary, there are a few deductions made from the actual amount.
These deductions can be in the form of income tax as well as employee provident fund. Many of us are usually upset about these deductions anyways.
However, one thing which we don’t consider is the benefits of these funds. The amount which accumulates over the years can be considered as a great saving.
It can even be utilized in many different ways, such as in case of emergencies and difficult financial situations. This is what makes an employee provident fund a useful concept for workers.
In case you are new to the process of provident fund, then here are its six benefits that you must remember.
1. Develops EPS
Even though your salary deductions mainly go for employee provident fund, you are simultaneously building a pension scheme as well. Almost 8.33% of the deductions go towards the employee pension scheme. This scheme works similarly to the employee provident fund. It allows you to accumulate money over the course of years till you work. In other words, you are not only receiving regular deposits in employee provident fund, but also employee pension schemes. It can be counted as a double benefit.
2. Tax Benefits
Every year when you pays income tax on your salary, you can save on employee provident funds. It means the amount that has been deducted by your company as EPF does not fall under the taxable income. This gives you an added advantage of saving a certain percentage of your hard earned salary. Even though this tax benefit might not be very significant, it can still help you save in small amounts.
3. Home Loan Assistance
Another benefit that you receive with an employee provident fund is assistance with home loans. If you are planning to build your own home or buy a new one, then this investment can be used as a security. Most insurance companies provide financial assistance for those who have a substantial provident fund in place. Hence, you will not have to worry about finances while buying or building a home.
4. Education Loan Assistance
If you are planning to send your kids or siblings for higher education, then to an employee provident fund can prove to be useful. With the help of an EPF, you can easily borrow an education loan for your kids. Besides, the percentage for the education loan is also nominal, since you have an EPF to put as collateral.
5. Medical Emergency
None of us can predict when a medical emergency would strike. For this, it is always essential to be prepared. In case you don’t have medical insurance, then your employee provident fund can also be utilized. You can make withdrawals from your provident fund, as much as six times more, in the case of medical treatment. This amount can be used for everything from hospital bills to surgery payments.
6. Insurance Benefit
Lastly, employees working in a big organization would know that their epf employer contribution needs to provide them with insurance. However, most organizations fail to do so! For this, they are required to submit a 0.5% salary value to the employee provident fund of the staff member.