EPF Money Withdrawal: Many people withdraw EPF money after losing their job or in case of any emergency. But the better option for this is to create a separate emergency fund. This will also fulfill your need and the EPF fund will also be safe.
If you are employed, then every month some part of your salary goes to the Employees Provident Fund (EPF). This money is deposited to make life secure after retirement. But many people withdraw money from EPF from time to time keeping in mind their needs. Doing this may seem beneficial for some time, but in the long run it can prove to be a loss deal.
Why is it important to save EPF money?
The biggest advantage of EPF is the compound interest it receives. The longer your money stays in EPF, the more interest you will get. For the financial year 2024-25, an interest of 8.25% has been fixed on EPF, which is completely risk free.
But when you withdraw money repeatedly, the interest you get gradually decreases. That is, the more you withdraw money, the more you weaken your retirement fund.
Tax exemption is also available on EPF
The interest received from EPF is completely tax free, but there is a condition for this. If you deposit money in EPF continuously for five years and do not withdraw it, only then it remains tax free.
If you withdraw money before the completion of five years, then tax can be levied on the withdrawn amount. The amount you withdraw is added to your annual income and tax has to be paid on it.
Keep an emergency fund separate
Many people withdraw EPF money after losing a job or in an emergency. But the better option for this is to create a separate emergency fund. This will fulfill your needs and the EPF fund will also be safe.
It is beneficial to keep the PF account active
If you change jobs and close the PF account, then a new PF account has to be created in the next job. This can make it difficult to track and transfer old funds. So it is better to keep your PF account only one and keep it active. The money deposited in it will keep earning interest without interruption.
This money will be useful after retirement
The real purpose of EPF is that when your income stops, you have a strong fund. In the era of rising inflation, it is very important to have savings for retirement. So avoid withdrawing EPF frequently. Save it till retirement – ​​because at that time this money will be most useful to you.
