Benefits of PF
Provident fund, or employee provident fund for that matter, is a scheme available to salary employees. Popularly known as a retirement benefit, employees are deducted 12% from their salaries which is then added to the kitty. In most cases, the government decides on the amount that employees contribute each month.
1. Low risk investment
Provident fund is a good investment since it is sponsored by the government. Each month, you contribute a small percentage on your earnings (normally 12 percent of the basic pay) to the fund. However, the percentage usually varies from one company to the other, but most companies deduct 12%.
2. Income tax earnings
The total amount you have contributed, the amount invested by your company as your retirement benefit is tax-free. There is not tax whatsoever on provident fund withdrawn after retirement, which means you get to enjoy your fruitful gains while pursuing new opportunities in your leisure time.
3. Savings plan
Provident fund is an ideal saving plan for employees as it provides a taxable-free income at retirement. The best thing is that eligible family members can have access to the funds in the event of a disability, retirement or death.
4. Employers retain valuable employees
Employers also use the fund to retain valuable employees, and their contributions help to reduce company’s total expense as well as corporate taxable income. In addition, the government handles the funds on behalf of the company, thereby alleviate their burden.
5. Income generated is tax-free
The main benefit of provident fund is that income generated is exempted from taxation. Nonetheless, this will depend on regulations set by the revenue department, which often vary from time to time depending on certain factors. Although these fund investments bear no risk, investors should do thorough research before making any decisions.
Retirement protection systems have their share of cons and cons. Some people claim that employees with high mobility tend to evade taxation by swapping employment.