4 Employer-Sponsored Plans to Consider
EPF (Employee Provident Fund)
This scheme was set up in the year 1952, the purpose of this scheme is to provide for a post-retirement cash inflow for employees. It was introduced by the EPFO and continues to be under the regulation of the Government. The key features are:
- Employer and employee extend 12% each of the employees’ monthly salary
- Tax–free interest extended is 8.10% p.a (in 2022) which is revised periodically
- A monthly compounding method is used to calculate the interest
- Universal Account Number (UAN) provides online access to PF Account
- Members are entitled to avail of pension from the accumulated funds from 58 years onwards
- EPF is portable across employers using the UAN
- EPF contribution is allowed for tax deduction under section 80C up to Rs. 1.5 Lakh
- Partial withdrawals are allowed for certain needs only
It is a monetary benefit extended by the employer, it is in appreciation of the services rendered by the employee to the organisation. It is applicable only for employees who complete at least 5 years of undisrupted service. Gratuity is calculated as: number of the years of service * (basic salary + Dearness Allowance) * 15/26. The gratuity amount received by Government employees is exempt from taxes. For others, the minimum of these three amounts will be exempted from income tax: Rs. 20 Lakh, actual gratuity amount, eligible gratuity.
GMC (Group medical cover)
Group health insurance is medical policies extended to employees of a company. The premium paid by the employee towards GMC is deductible under section 80D up to Rs. 25,000. If the cover is availed for senior citizen parents, an additional Rs. 50,000 is allowed.
GTC (Group term cover)
Companies may also offer group term life coverage, these secure the financial future of the family of the employee. The premiums paid by the employees toward such a plan qualifies under section 80C up to Rs. 1.5 Lakh. The death benefit provided to the beneficiary will be tax-free under section 10 (10D).
Employer-sponsored plans are often mandated, while some others are voluntary. It is always advised that individuals avail optimal benefit from these plans.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
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