If you work in a private or government institution, then every month from your salary some part is deposited in Employees’ Provident Fund (EPF). This money is not only a part of your earnings, but also makes the support of your retirement time. But many employees keep on removing this fund before and repeatedly, which can cause financial loss in the long term.
How does frequent withdrawal harm?
8.25% interest is paid by the government on the amount deposited every month in the EPF account, which is more than the other saving options of the market. When you withdraw money from this account again and again, along with your original amount, the interest received on it also decreases. This affects your long term saving.
There may also be loss in tax
The interest and principal received from EPF is usually tax free, but there are some conditions for this:
If you withdraw EPF money before 5 years, it can be taxed.
In such a situation, TDS can also be cut on your total withdrawal.
Therefore, repeated withdrawal without needs can cause you a shock of tax along with interest.
There may be a huge shortage in retirement fund
The basic objective of EPF is that when you retire and do not have any means of earning, then these funds can become your financial security. But if you have used it repeatedly during your job, then you have till retirement:
There will be not enough savings.
There may be a shortage of funds to cover health expenses.
Dependence on others may increase for living in old age.
Benefits of saving pf
Long Term Interest Benefits: By keeping money for a long time, your savings can increase manifold through compound interest.
Economic self -sufficiency: No one has to depend on anyone after retirement.
Emergency Cover: PF Fund is your last savings that you can use in medical or other emergency.
Security against inflation: This fund helps in maintaining your lifestyle in the increasing period of inflation.
When to withdraw PF money?
However, the government allows partial withdrawal in certain circumstances such as:
House purchase or construction
Marriage or education
Medical emergency
But except for these occasions, it is not prudent to tease the PF account at all.
conclusion
EPF is not only a savings scheme but also the safety shield of your old age. By repeatedly removing it, you can wash your hands with a safe future for which this plan is made. So if your immediate need is not very serious, avoid withdrawal from EPF and keep it safe till your retirement.
