EPF interest rate at 40-year low! Should you opt out of EPF? Check benefits, disadvantages

Employees' Provident Fund (EPF) is a savings instrument that helps salaried employees to save for their future. The scheme helps employees build their retirement corpus by putting in a small amount of money every month. Both employee and the employer contribute to the worker’s account.

Yes, employees can opt out of the EPF scheme, but there are several terms and conditions attached to it. Here are the 3 situations in which employees can stop contributing to EPF: 

 

1. At the time of the first job, employees can ask the employer not to enrol them on the EPF. 

 

2. If the employee has a Basic+DA (PF wages) of over Rs 15,000 per month, the individual can opt out of the scheme. 

 

3. At the time of job change, an employee can ask the employer not to enrol the individual in the EPF. However, that is only possible, if the employee doesn’t have an existing PF account. 

Employees receive a slew of benefits by investing in the EPF scheme. For instance, the interest rate offered by EPFO, though the lowest in 40 years, is still higher than FD schemes. 

 

Employees can avail of tax benefits under Section 80C of the Income Tax Act. Further, investing in EPF also provides employees with a retirement pension under the Employees’ Pension Scheme (EPS).

EPFO subscribers are also provided with a free of cost insurance benefit of up to Rs 6,00,000. The insurance money is provided to the family of the insurer in case of accidental death of the employee prior to the retirement. 

EPFO subscribers are allowed to avail of an emergency loan. The advance can be easily claimed by filing the online claim form.

An employee receives a higher in-hand salary if he or she decides to opt out of the EPF scheme. In such a case, employees will have a higher disposable income that can be used to invest in risky saving instruments offering better returns than EPFO.

Employees opting out of EPF will not just miss out on the benefits listed above, but will also lose out on the share of contribution from the employer’s side.