If you figure out the right plan for higher take-home pay through flexible alternatives, opt out of EPF- can be a good decision.
For Indian salaried workers, the Employee Provident Fund (EPF) is a mandated savings plan. Although it has long-term advantages, it might not suit everyone’s current financial tastes or aspirations. Here is an explanation of who is eligible to opt out of EPF and how to do so, in case you’re unsure if it’s something you could do.
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Why opting out of EPF may be the correct decision for some?
An increase in take-home pay
Liquidity and flexibility
Preference for non-traditional investing
Opting out may seem like a good idea, but it’s crucial to remember that doing so doubles your savings because you forfeit your employer’s portion of EPF contributions. Many people find it difficult to save for retirement on their own, but EPF guarantees a disciplined approach. Section 80C provides tax exemptions for the EPF. Selecting other investments could result in increased tax obligations.
The National Pension Scheme (NPS) is a government-sponsored program that provides tax advantages and flexibility.
One retirement planning tool that is connected to the market is the National Pension System (NPS). Through the “All Citizens of India” paradigm, salaried individuals who do not fit under the “Government or Corporate” model are able to take part in NPS. Once an investor reaches the age of 60, their NPS funds are locked, though this can be extended for up to 70 years. A minimum of 40% of the total corpus must be invested in order to access an annuity; the remaining amount may be withdrawn tax-free at maturity. A tax deduction of up to Rs 1.5 lakh is also available to investors under Section 80C, and an additional deduction of up to Rs 50,000 is available under Section 80 CCD 1(B).
Mutual Funds: In the long run, equity or hybrid funds may yield larger returns.
Hybrid funds take a balanced approach to investing, offering investors the opportunity for higher returns than fixed deposits while diversifying their portfolios. As with every investing decision, it is critical to recognize the risks and tailor your investment strategy to your financial objectives and risk tolerance.
A recent performance evaluation by PL Wealth Management revealed that 80% of equities mutual funds outperformed their benchmarks in 2024, despite a 4.03% decrease in Assets Under Management (AUM) from Rs 26,43,291 crore in September to Rs 25,36,803 crore in October, excluding Sectoral/Thematic Funds.
The Public Provident Fund (PPF) is a guaranteed-return investment that is safe and tax-efficient.
Because of the sovereign guarantee offered by the government, the Public Provident Fund (PPF) is thought to be among the safest investment options. Tax deductions under Section 80C are available for PPF investments. PPF now provides a 7.1% yearly compounded return with a 15-year lock-in period. It is significant to remember that the Ministry of Finance uses government bond rates to reevaluate the interest rate every quarter. Additionally, following the initial 15-year maturity, investors can choose to prolong their investment duration for an extra block of five years. The PPF has a minimum investment requirement of Rs 500 and a maximum investment limit of Rs 1.5 lakh every fiscal year.
