PF is one of the most popular savings tool in India.
It is one of the best investment vehicles as far as retirement planning is concerned. Let us understand PF in detail.
As a part of PF, employees contribute a fixed percentage of their salary. Employers also contribute their share to the PF. Total pool is invested in different financial instruments like bonds, stocks, mutual funds with majority being in the debt instruments.
On maturity employees get the entire invested amount along with the accrued interest. If the PF holder dies before maturity the amount is paid to the legal heir.
There are different types of PF -
Statutory PF - This is maintained by the central, state governments and their establishments and covers all government employees. The contribution to this fund is covered under section 80C and tax free up to the amount of 1 lakh. Entire proceed amount is tax free in the hand of employees.
Recognized PF - It covers any establishment that employs more than 20 employees. The Employees PF and miscellaneous provisions act, 1952 applies to this PF. Employees contribution are covered under section 80C, employer's contribution up to 12% of salary are tax exempt but above 12% are taxable for employee. Maturity proceeds are tax exempted for employees.
Public PF - This is covered under PPF act, 1968. Any individual whether salaried or self-employed can contribute to this. There is no corresponding employer's contribution. Individuals contribution is covered under section 80C up to rupees 1 lakh. Interest earned and maturity proceeds are fully exempt from tax.
With current interest rate of 8.7% on PPF deposits, this instrument gives the investor best post tax yield with no risk. A minimum yearly deposit of Rs 500 is required to open the PPF account. A maximum deposit of Rs 100,000 can be made in a financial year. Minimum tenure of the PPF account is 15 years which can be extended in block of 5 years. Pre-mature withdrawals can be made from the end of the sixth financial year from when the PPF commenced. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. Loan facility is also available from 3rd year to 5th year from when the PPF commenced.
It is one of the best investment vehicles as far as retirement planning is concerned. Let us understand PF in detail.
As a part of PF, employees contribute a fixed percentage of their salary. Employers also contribute their share to the PF. Total pool is invested in different financial instruments like bonds, stocks, mutual funds with majority being in the debt instruments.
On maturity employees get the entire invested amount along with the accrued interest. If the PF holder dies before maturity the amount is paid to the legal heir.
There are different types of PF -
Statutory PF - This is maintained by the central, state governments and their establishments and covers all government employees. The contribution to this fund is covered under section 80C and tax free up to the amount of 1 lakh. Entire proceed amount is tax free in the hand of employees.
Recognized PF - It covers any establishment that employs more than 20 employees. The Employees PF and miscellaneous provisions act, 1952 applies to this PF. Employees contribution are covered under section 80C, employer's contribution up to 12% of salary are tax exempt but above 12% are taxable for employee. Maturity proceeds are tax exempted for employees.
Public PF - This is covered under PPF act, 1968. Any individual whether salaried or self-employed can contribute to this. There is no corresponding employer's contribution. Individuals contribution is covered under section 80C up to rupees 1 lakh. Interest earned and maturity proceeds are fully exempt from tax.
With current interest rate of 8.7% on PPF deposits, this instrument gives the investor best post tax yield with no risk. A minimum yearly deposit of Rs 500 is required to open the PPF account. A maximum deposit of Rs 100,000 can be made in a financial year. Minimum tenure of the PPF account is 15 years which can be extended in block of 5 years. Pre-mature withdrawals can be made from the end of the sixth financial year from when the PPF commenced. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. Loan facility is also available from 3rd year to 5th year from when the PPF commenced.
SHARE
