Category: Personal Finance

How much will EPFO pay?

Reason for PF Withdrawal	Limit Withdrawal
Buying a plot	Basic salary of 24 months and DA
Constructing a house	Basic salary of 36 months and DA
Buying a house	Basic salary of 36 months and DA
Home improvement/renovation	Basic salary of 12 months and DA
Repayment of housing loan	Basic salary of 36 months and DA

PF withdrawal for construction of a house

Individuals who have been a member of the EPFO for five years are entitled to take a portion of their PPF money to build their houses. The house must be declared in the name of the member or his or her spouse before the money can be withdrawn. Your provident fund deposit will be used to fund the building of your home on a previously owned estate. This bid, however, is only valid if your construction starts within the first six months of withdrawal and is completed within a year.

The lowest of their basic salary and dearness allowances for 24 months, or the actual cost towards the purchase of a plot and building, or the total of employer and employee contribution along with the interest, will be taken into account to calculate the amount for those who want to withdraw money from the PPF to build a home.

PF withdrawal for repaying Home Loan

You can also withdraw a limit of three years of your annual compensation balance from your provident fund deposit to pay off an unpaid home loan in your or your spouse’s name. To withdraw the money, however, you must have completed at least three years of service. If the house is registered in his or her name or kept jointly, the PF member is allowed to withdraw up to 90% of the corpus to repay the unpaid home loan.

The provident fund scheme allows you to withdraw funds for any of the above purposes, including repaying the outstanding balance of a home loan taken out by you or your spouse. The total sum cannot be more than 36 months’ basic salary plus DA.

PF withdrawal for renovating and reconstructing a house

Employees will take money out of their EPF accounts to renovate and rebuild their homes. Furthermore, even if you want to renovate a pre-owned home, you can take money out of your provident fund account. However, the maximum sum that can be taken out for a property upgrade cannot exceed one year’s income, and you can only take another withdrawal after ten years.

Even if you haven’t taken advantage of the withdrawal facility for the purchase or construction of your home, you can use it to upgrade it. The sum you will withdraw for improvements or additions to your current home is limited to 12 months’ minimum salary and DA, according to the expense of the improvements.

Should you withdraw PF money to purchase a home?

Although it is possible to withdraw PF funds to purchase a home, experts believe that this is not a wise decision. This fund’s main aim is to provide some financial security during your retirement years, and it’s best if it’s kept that way. Compounding works in your favor over the working years if you keep adding to this corpus and do not withdraw money in the interim. That means you’ll have a sizable sum in your hands when you retire if you don’t use it for anything else. Begin saving money for a down payment over three to five years. If home prices rise or your investments do not perform as intended, you may want to postpone your home purchase for a year or two. Once you’ve made the down payment, apply for a home loan, but better not to touch your EPF funds unless you don’t have any other option.

1) Public Provident Fund

The interest earned on the Public Provident Fund or PPF as it is called is completely free from tax. Apart from this the PPF also qualifies for tax benefits under Sec80C of the Income Tax Act. This is a very popular investment scheme because of these two tax benefits that they offer. Apart from this the interest on the PPF are much better than almost all large nationalized banks in the country. The PPF currently offers an interest rate of 7.10 per cent per annum.

The one drawback of the PPF is that it has a lock-in period, however, that helps an individual to build a corpus at a later stage.

2) Tax Free Bonds

A few years ago there were many government owned institutions who were allowed to raise money through tax free bonds. Some of these were HUDCO, REC, PFC, Indian Railways Finance Corporation etc.

The interest earned from these bonds is completely tax free in India. However, investors may ask a pertinent question on where to buy these bonds from? Presently, they are listed on the stock exchanges. For example, the 8.65% IRFC Tax Free Bond offers an interest rate of 8.65%, however, you need to buy the same at a price of Rs 1,290, which means the yields drop.

Another thing is that the liquidity of these bonds is not to great.

3) ULIPs

Unit Linked Insurance Plans are another set of investments, where the income earned is tax free in the hands of investors. They do also provide insurance at 10 times the premium paid. However, the returns are not too great, as a lot of money is allocated to administrative, mortality charges etc. Investors have a choice of placing their money in equity schemes or debt schemes.

There is a lock-in period of 5 years and in some cases it could be more and that varies depending on the mutual fund. Over the years, these schemes have achieved reasonable popularity.

4) Interest on savings bank account to the tune of Rs 10,000

The interest on savings bank account does not attract income tax if the interest earned during the course of the year is Rs 10,000 across all savings bank accounts of an individual. So investors can plan accordingly. One of the problems with this investment is that the interest rates are very low. One needs to place the money in either small finance banks or banks like Indusind Bank, where the interest rates on the savings account is 6% for balances above Rs 10 lakhs.

About the author: Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.

1. EPF related EDLI claim:

For an employed individual (if you are EPF subscriber), in view of the pandemic, the government has enhanced maximum coverage under EDLI or Employees’ Deposit Linked Insurance Scheme to Rs. 7 lakh. This is the maximum sum assured payable. And beyond February 14, 2020, a minimum sum assured of Rs. 2.5 lakh shall be payable to the nominee. Remember the upward hike in maximum sum assurance payable of Rs. 7 lakh shall become applicable prospectively from the date of such notification i.e. from April 29, 2021.

Notably, in respect of the minimum cover, the notification was released in February 2018 and had a validity of 2 years, so to reinstate that a fresh order has been notified.

Who can make this EDLI claim?

In respect of the deceased family members who were in service in various organizations during the 12 months prior to the month in which they met unfortunate death, nominee can claim the benefit by filing form Form V IF.

For more details on making the EDLI claim Read here.

2. Claim against term insurance and other life insurance policies:

If the deceased was insured by some health or term plan or any other insurance plan for that matter, you can make a claim by submitting some of the required documents.

Documents required to make life insurance claim in India:

1. Death certificate

2. Policy document

3. Submitted claim form

4. In case the policy is not nominated then legal evidence for the title

5. Form of discharge executed and witnessed

There could be other documents that can also be asked such as hospital certificate, employer’s certificate, police inquest report and medical attendant certificate.

3. Claiming health insurance:

This can be a employee group health insurance cover or an individual cover. But in respect of health insurance, your proactive efforts will be counted upon. Say, if your any close relative happens to be diagnosed with Covid 19 and you know he or she is covered under the Employer group health insurance scheme, you can before starting off with the treatment may admit the concerned in the network group of hospital and tell the insurer of him or her undergoing the said treatment. Then if all things are in place, the insurer and the hospital will likely take care of the issue and necessary financial assistance will be rendered.

Documents required to claim health insurance in India

Employee Id and company details shall be sought for by the insurer

Person making the claim will be asked of his or her relation with the concerned

Filled claim form

Medical documents such as test, diagnostic reports, emergency reports etc.

Doctor’s prescriptions’

Discharge summary

Complete item-wise bill upon discharge

4. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY):

This scheme was launched in May 2015 and if you have also met with the loss of someone in family due to Covid 19 or due to some other exigency, you as a nominee or legal heir can make a claim of Rs. 2 lakh under Pradhan Mantri Jeevan Jyoti Bima Yojana. This insurance scheme was for all bank account holders in the age bracket of 18-50 years.

Details about the scheme:

For this your near and dear one who has confronted death must have paid for this policy in the year 2020-21. This is as the scheme is one-year renewable scheme and becomes due every year in June for premium repayment. The premium payable for this policy is Rs. 330 per year. This claim is also available in case of murder or suicide.

How to file for claim against Pradhan Mantri Jeevan Jyoti Bima Yojana for Rs. 2 lakh?

As the insured is generally the bank account holder i.e. the purchase of the PMJJBY policy is done from the insured’s bank account, the claim is also made through the bank route. It is to be noted that claim can be made 45 days post the enrolment in the policy. Say if a death happens before 45 days of enrolling the scheme then the claim shall not be available to the nominee. But this condition is waived in case of accidental death claim.

Now for claiming the proceeds, the heir or the nominee need to inform the bank of the casuaty and the claim that is being sought. So that you do no miss on the payments for reasons such as delay in complying with all the requirements.

Documents required to claim PMJJBY benefit

Duly filled claim form

Death certificate

Discharge receipt

Cancelled cheque leaf etc.

Now after you submit the details with the required document to your bank, the bank would need to make a claim with the concerned insurer within 30 days from submission of the claim to the bank.

Can you still buy the Pradhan Mantri Jeevan Jyoti Bima Yojana Policy?

If you have not been paying for this insurance then you can still enroll for it and premium shall be paid on a pro-rata basis.

Time line when PMJJBY is purchased Premium to be paid

Time line when PMJJBY is purchased	Premium to be paid
June, July & August –	Annual premium of Rs 330 is payable
September, October and November	3 quarters of premium at Rs 86; i.e. Rs. 258 is payable
December, January and February –
	2 quarters of premium at Rs, 86 i.e. Rs 172 is payable
March, April and May	1 quarterly premium at Rs 86 is payable

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Nippon India Small Cap Fund

Nippon India Small Cap Fund has given a returns of 109.95% in the last 1-year, which should probably be the best in its class. The 5-year returns from the fund is close to 20 per cent on an annualized basis, while the 3-year returns is at 11.37% on an annualized basis. The assets under management of the fund is more than Rs 12,000 crores and given that the fund invests in small cap, the risks are pretty high. The fund presently has about 97 per cent invested in stocks and the balance in cash. The portfolio of the fund comprises names like Deepak Nitrate, Tube Investments, Bajaj Electricals and Orient Electric.

Unlike largecap mutual funds, which have largest exposure to financials, Nippon India Small Cap’s largest exposure is to the engineering industry, followed by Chemicals and FMCG.

Union Small Cap Fund

This fund has given a returns of 90% in the last 1-year. The three year returns on an annualized basis is 10.72 per cent, while the 5-year returns has been pegged at 14%. Interestingly, the short terms returns are stupendous, while the longer terms returns are lesser. This is largely because in the last 1 year, the indices have rallied significantly, since the national lockdown of March 2020 and strong global cues.

Union Small Cap Fund is a smaller fund, with assets under management of just Rs 425 crores. Among the stocks that are in its portfolio include names like Happiest Mind Technologies, Galaxy Surfacants, Teamlease Services etc. The net asset value under the growth plan is currently Rs 22.45.

SBI Small Cap Fund

This is another fund that has given robust returns of over 90 per cent in the last 1-year. In fact, the returns from the fund is 91.64 per cent to be precise. These are solid returns by any stretch. Small cap funds are the most volatile amongst all categories of funds and hence investors who have an appetite for risk only should invest. Should the markets for some reason fall, we may see a sudden collapse in the net asset value of these funds.

This is a much bigger fund in size with assets under management of nearly Rs 7,500 crores. SBI Small Cap Fund has investments in stocks like JK Cements, Elgi Equipments, V-Guard, Blue Star etc. If you are looking to buy into the fund under the growth plan, the same would be at Rs 86.86.

Axis Small Cap Fund

Axis Small Cap Fund has not given 1-year returns like Union Small Cap Fund or SBI Small cap Fund. In fact, the returns are lower at 80% over the last 1 year. That too is not bad at all. The 5-year returns are at 18 per cent on an annualized basis, which would be much better than what fixed yielding instruments had to offer.

Under the Axis Small Cap Fund, one can invest through the SIP route as well, just like for the above two funds as well. The minimum SIP amount is pegged at Rs 500, while the minimum investment is Rs 5000. Small cap funds have rallied significantly in the last 1-year and one cannot be sure, if there is any great upside that exists in the short to medium term.

HDFC Small Cap fund

HDFC Small Cap Fund has given a returns of 103 per cent in the last 1 year and has a three star rating from Value Research. The current assets under management of the fund is close to Rs 10,000 crores.

About the author

Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.

Investment

oi-Sneha Kulkarni

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Updated: Thursday, May 6, 2021, 17:09 [IST]

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