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A PF account holder is eligible for pension after 58 years as well. (Photo: Pixabay)

Personal Finance

Benefits of Provident Fund and all about the recent changes

Contribution to Provident Fund (PF) is mandatory for all Employees’ Provident Fund (EPF) account holders. As per the Employees’ Provident Fund Organisation (EPFO) norms, an employee contributes 12 per cent of its basic salary and the employer also contributes the same amount. So, whenever we invest in a product, we primarily aim is to achieve three financial goals – create wealth, have a regular income through pension, and secure our family’s future. And all these things are taken care of in your EPF. I am sure, most of you are not aware of the benefits of your PF account but invest in it because it is a component of your salary.

There are three parts to your EPF

The first part of EPF is where your retirement benefits are accumulated.

The second part of EPF is the employee pension scheme (EPS)

The third and final part of EPF is the Employee Deposit Linked Insurance Scheme or EDLI, which is a life insurance cover.

Benefits of PF account

Free insurance

A Provident Fund account holder by default becomes eligible for free insurance up to Rs 7 lakh in case of death during the service period under EDLI (Employees Deposit Linked Insurance Scheme). Earlier, the death cover for PF account holder was Rs 6 lakh but now it has been enhanced up to Rs 7 lakh.

Pension provision

A PF account holder is eligible for pension after 58 years as well. However, to become eligible for the pension, there has to be a minimum of 15 years of regular monthly PF contribution required in one’s PF account.

Loan against PF

In the case of a financial emergency, a PF account holder can take a loan against one’s PF balance and the PF loan interest rate levied is only 1%. The loan will be short term in nature and has to be repaid within 36 months of loan disbursal.

Partial withdrawal during an emergency

EPFO allows partial withdrawal in case of medical or financial emergency subject to some terms and conditions.

Home loan and home loan repayment

An individual can use their PF account for home loan repayment. As per the EPFO rules, they can withdraw up to 90% of the PF balance for buying a new home or constructing a home. They can also buy land as well using one’s PF balance.