Education & Career Success Guide: Public Provident Fund

EFPO or Employees' Provident Fund Organisation has around six crore subscribers and manages a corpus of Rs 10 lakh crore. The retirement fund body receives over 1 crore claims every year including those pertaining to EPF withdrawal, pension fixation and insurance. The EPFO has been taking many steps for easing the process of claims settlement. While an employee's 12 per cent contribution goes toward EPF kitty, 8.33 per cent out of the total 12 per cent of the employer's contribution is invested in EPS or pension scheme. The balance 3.67 per cent is invested in EPF.

Here are six latest developments EPFO subscribers should know

1) Now, EPF claims above Rs. 10 lakh don't have to be filed online. The EPFO has revised its rules related to provident fund claims. In a circular dated April 13, EPFO said offline claims will also be accepted in all cases. EPFO subscribers have the option of filing online as well as manual claims for provident fund withdrawals.

2) Earlier, in a April 13 circular, EPFO had said that "in case the amount of claim settlement is above Rs. 10 lacs for PF claims and Rs. 5 lacs in respect of EPS withdrawal claims, the claim form must be accepted through online mode only." EPFO in the April 13 circular said that "considering the grievances raised by members, this stipulation will be kept in abeyance so that offline claims will also be accepted in all cases."

3) EPFO subscribers may soon get an option to increase or decrease investments out of their provident fund into stocks through exchange trade funds (ETF). The EPFO has been investing in stock markets through ETFs since August 2015. Exchange-traded funds (ETFs) are funds that track indexes such as Sensex and Nifty. In 2015-16, EPFO invested 5 per cent of its investible deposits which was subsequently increased to 10 per cent 2016-17 and 15 per cent in 2017-18.

4) In a recent meeting of Employees' Provident Fund Organisation's apex decision making body Central Board of Trustees (CBT), it was decided to explore the possibility of giving an option of enhancing equity allocation beyond mandated equity investment limit (presently 15 per cent) and also the option of reducing equity allocation below the limit to the subscribers.

5) EPF or Employee Provident Fund scheme would have two separate member account heads: Fixed Income - where fixed annual interest gets credited to members account - and Equity (ETF) - where investment in equity is reflected as units and the return is marked to market.

6) This accounting policy of investment in Exchange Traded Funds was recently approved by Central Board of Trustees or CBT, the apex decision body of EPFO or Employees' Provident Fund Organisation.

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With a minimum deposit requirement of Rs 500 and a maximum of Rs 1.5 lakh, PPF or Public Provident Fund remains one of the most popular small savings schemes. PPF accounts have a maturity period of 15 years, which can be extended in blocks of five years. Partial withdrawals from PPF are allowed after the account completes a specified number of years. Also, a loan facility is available on PPF accounts. Currently, PPF accounts fetch an interest rate of 7.6 per cent per annum (compounded yearly). They are revised on a quarterly basis.

Here are 10 Things You Must Now Before You Invest In PPF:

1) Partial withdrawal from PPF accounts is permissible the seventh financial year from the year of opening account, according to India Post's website - indiapost.gov.in.

2) A depositor can make partial withdrawals, once every year from his or her PPF account.

3) Partial withdrawals from PPF accounts are also tax-free.

4) PPF deposits fall under the EEE (Exempt, Exempt, Exempt) tax category, which means an investor is not liable to pay tax at all three levels - investment, earning and withdrawal. All payments from PPF shall be exempt from tax under Section 10 (11) and partial withdrawals or premature closures are no exceptions.

5) Partial withdrawal is restricted to 50 per cent of the credit balance at the end of the fourth year immediately preceding the year of withdrawal or the year immediately preceding the year of withdrawal, whichever is lower.

6) In case the withdrawal is sought from a minor's account, the guardian has to make a declaration that the money is required for the use/benefit of the minor.

7) If PPF accounts are extended beyond maturity period of 15 years partial withdrawals are allowed once in a year. But the amount of withdrawal during a five-year block period should not exceed 60 per cent of the balance in the account at the commencement of the block period.

8) A PPF subscriber is allowed premature closure of his or her account or the account of a minor of whom he or she is the guardian only after the account has completed five years. It is allowed in special situations like if the amount is required for treatment of a serious ailment or higher education.

9) In other words, investors shall not be liable to pay any tax on the interest portion or the principal sum received on premature closure of the PPF account.

10) Loan facility from PPF accounts is available from the third financial year of opening the account, according to the India Post website. The loan can be taken up to 25 per cent of the amount in the account at the end of the second year immediately preceding the year in which the loan is applied for. The loan facility from PPF accounts are allowed till the end of fifth financial year from the end of the financial year in which initial subscription was made. Loans from PPF accounts can be taken only once a year.