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How EPF Helps You Save On Tax?

Published On Sep 27, 2021

The Employees' Provident Fund (EPF) was established in 1952 with the goal of encouraging employees across India to save for retirement. It functions as a corpus fund, with recurring contributions from both the employee and the company. The EPF plan has introduced a sense of convenience to its users through the digital platform with its recent updates. With the advent of the Universal Account Number and online EPF portals, any employee can easily update, transfer, and withdraw his or her EPF account. Plus, there's more. Not everyone who has an EPF account realises all of the tax advantages. Continue reading to know about the tax-saving benefits of EPF in detail. 

How Employee Provident Funds (EPF) Helps You Save On Tax?

The following situations highlight the tax-saving benefits of EPFs. 

  • Tax Deduction on your Income

    In most cases, an EPF account works by deducting a portion of your income and directing it to your EPF account. The monthly contribution you make to your EPF is tax deductible under the Income Tax Act of 1961, up to a ceiling of Rs. 1.5 Lakhs per year.
  • Tax exemption on your Employer's Contribution

    Your employer, or the firm for which you work, is another contributor to your EPF account. The total amount that your employer contributes to your EPF account is tax-free.
  • Tax-Free Interest

    Another perk of having an EPF account is that the interest you accumulate over time is tax-free.
  • Withdrawals Are Tax-free

    Any withdrawal you make from your EPF account will be tax-free as long as you meet the minimum requirement of a 5-year lock-in period. 

What are Other Benefits of Employee Provident Funds (EPF)?

The EPF system has various other advantages in addition to the tax benefit.

  • Long-Term Security - Employees can save for a lifetime through the EPF system, and the benefit can be received when they retire or become dependent.
  • Savings for Unforeseen Circumstances - The EPF amount can be used by the employee in the event of an emergency because the employee has the option to take the funds early.
  • Security after Death - In the event of an employee's death, the employee's dependents are entitled to the EPF funds placed by the employee.
  • Pension Benefits - As previously said, an employer contributes to the PF fund and a pension, which is beneficial during the post-retirement era.
  • Insurance Coverage - Where group insurance is not available, the EPF provides for employee life insurance. This plan guarantees that employees are adequately covered.


The Employees' Provident Fund (EPF) has an exempt-exempt-exempt tax status, in addition to its safety and outstanding returns, when compared to other fixed options such as PPF and FD. That is, when it reaches maturity, it is tax-free. Contributions to the EPF, as well as the interest earned on those contributions, are tax-free, subject to certain criteria.

Also read: 

What is Joint Life Insurance? What are the Benefits of Purchasing It?

Things to Consider While Buying a Unit Linked Insurance Plan

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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