PF Withdrawal: Save money! Avoid these mistakes with your Provident Fund account

PF Withdrawal: PF is a retirement fund and it's withdrawal should be the last choice of the Provident Fund account holder.

PF Withdrawal: Don’t withdraw from the provident fund account to buy a house. There are banks that lend money to buy a house, but none to finance retirement. Photo: Reuters

PF Withdrawal: Your Provident Fund (PF) is considered a retirement-oriented investment and one should go for the PF withdrawal when there is no other way to generate funds to meet new requirements. According to the tax and investment experts, once you do the PF withdrawal, your retirement fund gets compromised. Apart from this, the PF account holder loses some benefits like pension benefits post-retirement and compounding benefits on your PF account balance. SO, ideally, unless it is an emergency, PF withdrawal by subscribers should not be done.

Speaking on flaws involved in PF withdrawal CS Sudheer, CEO & Founder of IndianMoney.com said, "One of the biggest benefits of not withdrawing PF when quitting your job is you continue to earn high interest. EPF currently offers over 8.5 per cent interest which is the highest among most conservative investments. You also lose the opportunity to get a regular pension through the Employee Pension Scheme on an early withdrawal; compromising retirement. The EPF corpus withdrawal is tax-exempt if you contribute to the EPF account for 5 continuous years. Withdrawing before this time period means EPF corpus gets taxed."

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Earning individuals must avoid going for PF withdrawal says Manikaran Singhal, a SEBI registered tax and investment expert. He said, "PF is a retirement fund and its withdrawal should be the last choice of the PF account holder. The EPFO allows PF account holders to withdraw up to 90 per cent of the PF account balance for buying a home or construction of home or repayment of the home loan. But, one must know that PF is not meant for buying or constructing a home. It's for your monetary needs post-retirement." Singhal went on to add that during the switch of one's job, it has been found that the earning individual is more interested in PF withdrawal than to continue the same PF account with the new recruiter. He suggested PF account holders continue with the same PF account at the new recruiter.

CS Sudheer of IndianMoney.com said that the idea is to treat the PF account as a retirement fund and not a bank account citing, "The EPF balance compounds and you can retire rich. Don’t withdraw from the PF account to buy a house. There are banks that lend money to buy a house, but none to finance retirement."

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