Every salaried person worries about financial security after retirement. In such cases, the Employees’ Provident Fund (EPF) plays an important role.
This scheme not only protects your savings but also provides a pension after retirement.
Earlier, both employees and companies contributed 12% of basic salary + DA to EPF.
Now, the government has allowed contributions to be made on the entire salary, not just the basic and DA.
This change means employees can build a larger retirement fund.
Benefits of Higher EPF Contribution
Bigger Savings and Pension: Earlier, pension was calculated only on a salary of up to ₹15,000. Now, contributions can be based on the full salary.
For example, if your salary is ₹50,000, earlier only ₹15,000 was considered for deductions.
Now, deductions will be on ₹50,000, increasing your EPF balance and pension.
Wealth Growth with Interest: EPF earns annual interest and benefits from compounding.
Regular contributions for 10–20 years can build a large fund, ensuring financial security after retirement.
Insurance Protection: EPF includes Employees’ Deposit Linked Insurance (EDLI), which provides financial support to your family in case of your death.
Tax Benefits: Under Section 80C of the Income Tax Act, contributions up to ₹1.5 lakh per year are eligible for tax exemption.
Interest earned and the maturity amount are also tax-free.
Family Security: EPF also supports your dependents.
After your demise, your family may receive benefits like widow’s pension and children’s pension.
Emergency Withdrawals: You can withdraw from EPF during medical emergencies, for children’s education, or while buying a house.
A larger balance ensures peace of mind in such situations.
How to Increase Your PF Contribution
Through HR: Inform your company’s HR that you want to contribute based on your full salary.
They will arrange for the extra deduction.
Via Voluntary Provident Fund (VPF): You can add extra contributions voluntarily.
VPF earns the same interest rate and tax benefits as EPF.
Higher Pension Option: Employees who joined before September 1, 2014, can submit a joint option form with their employer to ensure their pension is calculated on the full salary.
Points to Remember
Higher contributions reduce your take-home salary since deductions increase.
EPF has withdrawal restrictions, so consider your age, income, and financial needs before increasing contributions.
