Your PF can make you a crorepati!!!!
Don’t you hate it when you look at your salary slip and find that sundry deductions have pared it down. But believe us, you should actually feel happy about one of these deductions-the monthly contribution to the Employees’ Provident Fund (EPF). The 12% of your basic salary that flows into the EPF every month has the potential to make you a crorepati when you retire.
Sounds unbelievable? After all, the investment seems too small and the interest rate offered doesn’t seem too high. But don’t forget that a matching contribution comes from your employer every month. Don’t also underestimate the power of compounding and what it can do to your retirement savings over the long term. As the graphic above shows, the 8.5% interest earned on the EPF can help a person with a basic salary of Rs 25,000 a month accumulate a gargantuan Rs 1.65 crore in 35 years.
The Direct Taxes Code had initially proposed that new contributions to the EPF be taxed on withdrawal. However, the revised draft has once again made EPF fully exempt. This makes it the best debt option available in the market.
In fact, the EPF can single-handedly account for the debt portion of your financial portfolio. You need not invest in tax inefficient fixed deposits or worry about which debt fund to invest in. All you need to ensure is that you don’t ever withdraw from your EPF account till you hang up your boots. If at any stage you find that your debt portion is lagging, you can add more through a voluntary increases in your contribution.
However, few people are able to reach even the Rs 1 crore milestone in their careers. EPF rules allow encashment of the accumulated corpus when a person quits a job and it’s not uncommon for people to withdraw their PF at that stage.
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