How To Optimize Tax Savings With EPF Contributions for ITR Filing in 2024
You must have adequate money saved for retirement if you are a salaried person and want to make sure you can cover your daily expenses while keeping up your lifestyle. Here’s where the Employee Provident Fund (EPF) might help you. The purpose of the EPF savings plan is to assist individuals in creating a retirement fund. The Employees’ Provident Fund Organization (EPFO) is now in charge of managing it. It was founded in 1952 under the Employees’ Provident Funds Act.
Employees must contribute 12% of their monthly basic salary to the EPF plan, and their employer must match this amount. When you retire, you get a lump sum payment that includes interest and the whole amount—your contribution plus the employer’s.
Because the Government of India oversees EPF and ensures a set rate of return, it is seen as a low-risk investment. The Employee Pension Scheme (EPS) receives an interest-free allocation of about 8.33% of the employer’s contribution.
For example, you may claim a deduction of Rs 1,44,000 (12 x Rs 12,000) each year under Section 80C if your monthly basic pay is Rs 1,00,000 and your EPF contribution is Rs 12,000 (12% of your basic salary). Your tax burden is lowered as a result, as is your taxable income.
Members benefit from tax savings as well as a stable source of retirement funds via the Employee Provident Fund (EPF). Its long-term investment potential is increased by this.
CEO and co-founder of Tax2win, Abhishek Soni, told Mint that EPF is a great option for retirement planning since Section 80C enables deductions of up to Rs. 1,50,000, provides for tax-free interest collection, and totally exempts withdrawals after five years from income tax.
Because of its unique EEE (Exempt-Exempt) tax advantage and assurance of stability in its finances, EPF is an essential component of successful retirement planning. One significant benefit provided by the EPF is the triple tax exemption on contributions, interest, and withdrawals. Ashish Aggarwal, Director of Acube Ventures, told Mint that EPF is a preferred savings option because of its substantial tax advantage.
Contributing a portion of your salary to a pension fund reduces your taxable income and may help you save money on taxes. When you take out your EPF funds in full after retirement or when you choose to quit your job, there are no taxes applied. This suggests that there aren’t any tax breaks, so you can still make the most of your hard-earned money.
