Dive into the world of EPF returns and debunk common myths. Understand the nuances of Employee Provident Fund, its returns, and the truth behind misconceptions. Stay informed and make sound financial decisions.
It will be true to say that there are thousands of myths associated with EPF returns. But before addressing them let’s first discover what do EPF and EPFO exactly mean.
EPF stands for Employee Provident Fund. It is a mandatory saving scheme regulated by EPFO (Employee Provident Fund organization).
In this scheme, both employee and the employer contribute 12% of the basic salary and dearness allowance of the employee to EPF. Basically, the amount is invested at different places, and because of that employees also get interest of 8.15% p.a. on this amount.
The main purpose of this scheme is to financially secure the employee so that he/she doesn’t need to worry about finances when they retire.
EPF return is the interest earned on the contributions made by employees and employers to the PF account. EPF return needs to be filed by an employer once every month. The due date for filing an employee provident fund return is the 25th of every month.
The EPF return is filed through EPFO unified portal. It consists of various information regarding employees such as total salary, total no. of employees, and their PF account numbers. In case of default or untimely submission, an employer will have to pay a penalty.
Myths related to EPF returns-
Due to less awareness, people have developed certain myths regarding EPF returns over the years. Some of the common myths are given below-
1- Fixed returns-
It is a common myth believed by most people that the interest earned on EPF returns is fixed for every year. But in reality, these returns vary from one year to another based on the economic condition of the county and government policies. So EPF returns are never fixed.
2- Only employee contribution-
Many people falsely believe that only employees contribute to EPF returns but this is not the case. Both employer and employee contribute to it in a fixed percentage every month and then an employee enjoys its benefits solely usually at the time of retirement.
3- Withdrawn without penalties-
EPF returns are withdrawn not only for retirement purposes but also for educational, medical, and other emergencies. One thing which should be noted is that if it is withdrawn prematurely or without any valid reasons it can lead to implication of penalties and tax implications on an employee.
4- EPF rates are predictable-
Though certain individuals feel that as interest rates vary from year to year depending on various factors, EPF rates cannot be predicted based on past years. It is actually a very challenging task to predict these rates in advance. One needs to have expertise in finance to be able to predict it and still the prediction is not guaranteed to be 100% true.
5- Uniform rates-
Many individuals have this misconception that EPF returns are the same across all the companies but the reality is far different from it. EPF return rates are different for different companies because their policies differ from each other. In fact, they also vary depending upon the EPF fund and the decision of the EPFO.
6- Unaffected by market returns-
It is a common myth that EPF return rates have no effect on market conditions. But in reality, market fluctuations have a significant effect on them. As EPFs are invested in different securities, it is evident to say their return would also be based on the fluctuations occurring in the market conditions.
7- Immediate returns-
People often forget that being a long-term saving scheme EPF cannot yield immediate returns. It actually accumulates over time through compounding and an employee gets its benefit at the time of retirement. So an employee gets the benefit of EPF return after a long time.
8- In pace with inflation rates-
People believe that EPF returns are sufficient to beat inflation as they provide a secure avenue for savings but in reality, the interest rate provided by EPF cannot always keep pace with inflation rates and thus the purchasing power may decrease.
9- Other investment options are better-
It is a common myth that EPF returns are not as good as other investment options. In reality, they are better than several investment options. The interest rates they offer are even higher than FDs and they are tax exempted. So the whole accumulated amount can be withdrawn by an employee without any tax deduction.
10- Withdrawal is difficult-
Unlike in previous times, now employees don’t need to stand in long queues or do lots of paperwork. Due to the advancement of technology, now it has become much easier for them to withdraw EPF amounts. For that, they just need to go to the website named – EPFO e-sewa and then enter UAN no. , login id, and password. That is how they can check the amount and even withdraw it with just a few clicks.
11- Withdrawn only after retirement-
Another popular misconception is that EPF returns can be withdrawn only after retirement. It can actually be withdrawn much before attaining retirement for various purposes such as pursuing higher education, medical purpose, etc.
12- Inflexible investment-
Many individuals falsely believe that returns on EPF are less flexible as employees have no control over the investment avenues. But in reality, employees can tailor their investments based on their level of risk tolerance and financial goals. An employee can even choose to contribute more than the mandatory amount to their EPF account.
In conclusion, myths related to EPF returns are widespread due to misconceptions among people and a lack of accurate information. When it comes to investment options and such saving schemes, people often assume few things like complexity in withdrawal, uniform rate of returns, speedy returns, etc. So it is essential to come out of these myths and gain a clear understanding of how EPF returns actually work. One should try to understand the true nature of EPF returns so that its complexities could be navigated easily.
One should consult financial experts, and stay updated on changes in rules and regulations regarding EPF returns. This way an employee can align his financial goals with it accordingly.
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