If you ever think of withdrawing PF from your EPFO A/c for –
- Spending for any function
- Depositing in Savings A/c
- Making FD with any bank
- Any other type of savings
Then keep in mind the following things :
- PF gives you 8.65% compounded interest return which an FD/savings deposit cannot give.
- PF is managed by professionally qualified people
- PF will be regulated by govt. agencies like EPFO
- If you withdraw your EPF money before five years of contribution, your entire EPF withdrawal will be taxable and also the tax benefit you got under Section 80C on self contribution will be reversed
- You will not be eligible for pension under EPS scheme if you do not contribute 10 yrs to the PF A/c
- The deposits are insured under EDLI scheme
Considering the above facts, it is advisable to withdraw your PF amount only if the returns from the amount invested elsewhere would outperform the PF returns.
For example, Gold gives you, say 12%(which is more than PF returns of 8.65%) CAGR return in 5 yrs, then you can withdraw PF and invest in gold subject to analysis regarding tax implications and market volatility risks related to Gold.
It is further advisable to transfer your EPF as well as Employees’ Pension Scheme (EPS) money when you change your job.
The last but not least – Think before you Act