To present reduction to staff and employers going through money crunch, the federal government has decreased their necessary contribution to the Employees’ Provident Fund (EPF) from 12% to 10% of the essential pay plus dearness allowance, for 3 months. But what if you will not be going through a money crunch and don’t want to cut back your contribution?
While you can’t do something concerning the employer’s contribution, you can make investments your 2% share in different devices that give related returns. According to monetary planners, individuals who have steady revenue at current and are wanting to keep their contribution of 12% of the essential wage plus dearness allowance can contribute the extra quantity of two% in Voluntary Provident Fund (VPF) or Public Provident Fund (PPF).
Note that the overall 6% shortfall in your EPF contribution over three months can depart an enormous dent in your total retirement corpus.
This lower contribution impacts staff in two methods. “First, the EPF contribution is eligible for a tax break below Section 80C. If it’s decreased, the tax break additionally reduces. Second, would imply decreasing of the EPF corpus or retirement financial savings,” stated Adhil Shetty, CEO, BankBazaar, an internet market for monetary merchandise.
Under VPF, you can improve your share of EPF contribution, however the employer gained’t exceed the 12% threshold, which has been decreased to 10% for 3 months. The further quantity you contribute, past the brink set by the Employees’ Provident Fund Organisation (EPFO), goes into VPF. You have the choice to make investments up to 100% of your fundamental wage plus dearness allowance in VPF.
The rate of interest on VPF is identical as EPF, which the federal government often pronounces in the direction of the top of a monetary 12 months. VPF additionally offers the identical tax advantages as EPF. It falls below the exempt-exempt-exempt (EEE) tax construction—you get tax deduction profit on the time of funding, there’s no tax payable on accrual or withdrawal.
When you change jobs, you can even transfer your VPF funds similar to you transfer EPF. Both are linked to the Universal Account Number (UAN). The withdrawal guidelines additionally the identical.
what you ought to do
Employers, usually, give a window to staff to go for VPF in the beginning of a monetary 12 months. “Employees can choose anytime in the 12 months. The Provident Fund Act doesn’t have any situations or restrictive clauses for an worker choosing EPF. Employers often search such funding particulars in March for administrative management. It helps corporations to make the adjustments proper in the beginning of the 12 months,” stated Anil Lobo, an unbiased HR marketing consultant. Check with your HR division whether or not the VPF window continues to be open.
But what if the window has closed? In that case, Basavaraj Tonagatti, a Sebi-registered monetary adviser, suggests you can take a look at PPF, which additionally enjoys EEE tax standing and provides assured returns, as per the charges introduced each quarter. If you already exhaust your PPF, the subsequent choice is to improve your contribution to the debt portion of your retirement kitty.