How to Grow Your EPF Fund Safely?

How to grow your EPF fund safely

EPF (Employee’s Provident Fund) also known as PF is a government-backed scheme that ensures that an employee gets enough funds to support his/her life post-retirement. It is a safe investment instrument that provides attractive returns due to the high-interest rate that gets revised every year.

However, it is also important to park your EPF safely post-retirement. There are many ways through which you can grow your PF quickly without exposing it to any market risks. Let’s have a look at them one by one. 

National Savings Certificate 

NSC or National Savings Certificate is an ideal place to park your post-retirement savings as it is a government-backed postal savings scheme. The interest rate offered on NSC gets revised after regular intervals. 

Benefits:

High-interest rates 

  • Currently, the interest rate is 7.9 which is slightly more than the interest rates provided by bank FDs. Investors can start investing in NSCs by visiting their nearest post office. 

Suitable for everyone

  • The minimum amount that can be invested is only Rs. 100 and there is no upper limit. Therefore, it is suitable for all kinds of investors. 
  • Moreover, there is no age restriction on this savings scheme which makes it lucrative for senior citizens. 

Relief from tax burdens

  • A tax deduction of up to Rs. 1.5 lakhs can be claimed by the NSC investors from their taxable income. 
  • Tax is applicable on the interest earnings but a tax rebate up to Rs. 1.5 lakhs can be claimed as per section 80C of the Income Tax Act. 

Fixed deposits 

A fixed deposit is an investment option in which you can deposit a fixed amount for a fixed period. The interest rate offered for the duration of the investment is also fixed.  

The interest rate offered by bank FDs is slightly less than NSCs. However, the method of interest calculation is quite different as the interest rate of FDs is compounded every quarter whereas the interest rate of NSCs is compounded every year.

Therefore, you can earn much more through bank FDs that offer competitive interest rates. However, the ideal FD investment is those offered by NBFCs such as Bajaj Finance. You can earn up to 8.05% interest rate on Bajaj Finance FD, which is higher than most other fixed income investments. 

As a result, senior citizens can park their EPF funds in corporate FDs to safeguard their investments and earn high returns.

Additional benefits of investing PF corpus in FD:

Credibility– Corporate FDs are safe from fluctuating market risks. Bajaj Finance FDs have received high ratings for their safety and stability by third-party credit rating organizations like CRISIL and ICRA. This means that you can grow your EPF fund safely by choosing a risk-free corporate FD.

Liquidity – The premature withdrawal rules of NSCs are quite strict. Premature withdrawal of investments is allowed only if the primary account holder dies. However, an FD can be withdrawn prematurely anytime without any issue. 

You might have to pay a penalty on premature withdrawal but that is hardly 1 percent of the total interest earned during the period for which the FD was locked-in. 

Laddering of investments- Investors have the flexibility of choosing a tenor between 12 and 60 months as per their convenience. Moreover, with multi-deposit facility, they can invest in multiple deposits with one cheque and different interest payouts and tenor can be set for each of these deposits. This not only helps them to ladder their investments but they can break one FD and keep the other FDs intact whenever an emergency arises.

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