EPFO Covid-19 Advance Scheme: The Employees’ Provident Fund Organization (EPFO) once again on Monday approved over 5 crore EPFO subscribers to withdraw money from their provident fund. The EPFO has taken this decision to provide financial support to the people affected by the second wave of Corona epidemic. According to this decision, the subscribers who are in need of money can withdraw money equal to 3 months’ salary from their fund and there will be no need to return it.
However, experts believe that withdraw money from this fund only when it is very necessary, such as to pay off a loan or to maintain your credit score or for an emergency fund in case of non-availability of other sources. Experts suggest that it should not be invested in equities by withdrawing from EPF account in the greed of higher returns.
In March last year also, people who were financially affected due to Corona epidemic were allowed to withdraw money from their PF account. Under this, the subscribers were allowed to withdraw three months’ basic salary and dearness allowance or 75 percent of the amount deposited in the account, whichever is less. On Monday, the EPFO has once again approved this. Till 31 May 2021, EPFO has settled 76.31 lakh COVID-19 advance claims and sent Rs 18698.15 crore to the subscribers’ bank accounts.
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Higher rate of interest than FDs and other small savings schemes
EPF earns a higher rate of interest than bank FDs or small savings schemes. In the financial year 2020-21, the amount deposited in the EPF account was getting interest at the rate of 8.5 percent, which is equal to the interest income after deduction of tax and 12.5 percent of the income before deduction of tax, which is the highest tax of 30 percent. Those coming in the rate slab would have. This is a very big reason that most people do not withdraw from PF account on any occasion other than buying a house, education of children or their marriage.
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Withdraw money in these circumstances
- If there is a great need of money due to medical expenses or any other situation and you are left with only personal loan or other such options which may have to pay interest at expensive rates, then in such circumstances it would be right to withdraw money from EPF account. In such a situation, one should not increase the financial burden by imposing more debt on oneself by taking additional loans, when income is not coming, there are problems in paying off your current debts.
- Personal finance experts believe that withdrawal from EPF account should not be made the default option. Withdrawals should be made from this account only when all other options have been exercised. Vishal Dhawan, Founder and CEO, Plan Ahead Wealth Advisors, in a conversation with The Indian Express suggested that withdrawals from EPF accounts should be made only if the money requirements from FDs, debt mutual funds or other types of small savings schemes have not been met.
- If an individual is facing problem in repayment of his current debt and there is no additional source of funds to pay it, then experts believe that some part of the loan should be paid off by withdrawing from the EPF account so that the credit history But don’t have a bad effect. According to Dhawan, credit history can affect the ability to take loans from any financial institution in future.
- According to Dhawan, if you are paying interest on any loan more than the rate of interest received on EPF, then it should be paid by withdrawing it from the PF account.