Tagged: EPFO

NTH :: Should EPFO subscribers hike their ETF investments?

The whole theme of EPFO providing these choices to increase and reduce equity exposure is a case of duplication of effort and design. Financial experts are advising investors to leverage existing options.
Hiral Thanawala | May 02, 2018 11:28 AM IST | Source: Moneycontrol.com


There is good news for over five crore subscribers of retirement fund body EPFO. Soon they may have an option to increase or decrease investments of their provident fund into stocks through exchange-traded funds (ETFs) in the current fiscal. In its last meeting, the Central Board of Trustees decided to explore the possibility of granting an option to increase or reduce equity allocation to subscribers contributing through ETF above the 15% cap.

The Employee Provident Fund Organisation (EPFO) had started investing in ETFs from investible deposits in August 2015. In FY16, it invested five percent of its investible deposits, which was subsequently increased to 10 percent in FY17 and 15 percent in FY18. However, subscribers were not at all pleased with this increase in exposure to equities. There were some who didn’t want to risk their retirement corpus built through the EPF route. While other subscribers were keen to increase exposure to equities for better returns in the long-term.

So, what advice do financial experts have for EPFO subscribers looking to increase their exposure to equities through the ETFs route when the option is opened up?

Who should increase or reduce investments in ETFs?
Several investors are not reasonably patient with their active investments and panic when they see volatility in the market. Chenthil Iyer, a Sebi registered investment adviser and author of ‘Everyone Has an Eye on Your Wallet! Do You?’ said these investors generally invest only in fixed deposits and post office schemes. “For such investors, increasing the equity exposure through EPF route may be a good option as it is a passive mode of investing and ensures a long-term commitment.”

For investors who manage their active investments and have a well-diversified portfolio, Iyer recommends a minimum equity exposure.

Arvind Laddha, Deputy CEO, JLT, Independent Insurance, has a word of caution. “In the past, there have been negative returns for consecutive two-to-three years or even more from equity markets and this could compromise the savings of EPFO subscribers which they are not used to.”

As not all investors understand the risk of equities and their volatile nature of returns, Kalpesh Mehta, Partner at Deloitte India, feels an investor should also consider one’s age, risk appetite, financial obligations and total net worth before increasing exposure to equities through ETFs.

Benefits of increasing investments in ETFs
Here are the benefits of increasing investments in ETFs through EPF contribution as explained by Amit Gopal, Senior Vice President, India Life Capital: 1) Regular monthly SIP because of mandatory contributions; 2) Inexpensive as employees (contributors) don’t have to pay fund management fees in the current model of EPF; and 3) Tax advantages on contributions. To this, Colonel Sanjeev Govila, CEO, Hum Fauji Initiatives lists institutional framework taking care of selection and research of equities while investing.

Drawbacks of increasing investments in ETFs
Gopal highlights drawbacks such as insufficient administrative track record, illiquidity associated with a retirement fund product, absence of choice in fund manager and products.

To this, Iyer cautions, “Putting the responsibility of equity exposure of this fund on the individual may expose it to the vagaries of the individual’s risk perception, leading to possible over-exposure.”

Make EPF more investor friendly
EPF needs to be investor friendly with additional facilities of enhancing and reducing equity allocation which is likely to be made available in the coming two-to-three months. Iyer feels periodic electronic statements should be mailed to the subscribers which clearly mentions the amount and number of units available in ETF.

“Further an automatic mode of distributing the contribution into equity and debt should be made available based on the age of the individual just like NPS.” This, he feels, will ensure minimum manual intervention in decision-making with regard to equity exposure.

According to Goyal, while EPFO have described some methods of passing on returns, nothing concrete has been implemented. “It is unclear how they will ford the system and governance challenges that could arise.”

It would therefore be good if these issues are resolved before increased allocation and employee choices are implemented. An investor needs to keep a track of this developments for their own benefit.

Leverage on existing options instead of duplicating efforts
The whole theme of EPFO providing these choices to increase and reduce equity exposure is a case of duplication of effort and design. Financial experts are advising investors to leverage existing options.

“The NPS already provides the same structure and benefit. Integrating it with the EPFO and permitting portability is a more efficient way of enhancing employee choice. NPS already has the architecture and track record of administering an employee choice model,” Gopal added.

Source: https://bit.ly/2IdyOMu

ATM :: Planning to invest in home? Here is how you can raise your down payment

With interest rate-cuts and increased liquidity with banks following the demonetisation, loan products have more accessible.
Adhil Shetty | Published: May 11, 2017 4:02 PM | Financial Express


Consumers with healthy credit scores today would be receiving loan offers aplenty. With interest rate-cuts and increased liquidity with banks following the demonetisation, loan products have more accessible. Yet availing a home loan for the very first time remains a complex experience that loan seekers view with trepidation.

There are often misconceptions about what a home loan can do, and what it costs. For instance, you may be of the belief that the loan granted will match the property price. That is untrue, as financial establishments expect you to pay the margin amount.

The margin amount is another term for down payment for your new home. It could be anything between 15% and 20% of the home’s net value. For a first time home buyer, it is no easy task raising this money.

Here are some ways to help.
1. Strategic savings
Nothing beats strategic savings and for this you need to start your planning early. It involves you visualizing your long-term fund needs—including the need to buy a home—and beginning to save and invest accordingly. Begin with simple and accessible investment tools such as mutual funds or recurring deposits. Slowly and surely, you’ll be able to build your deposit over time. You can be efficient at this by locking in your savings at the start of the month. The earlier you start, the sooner you build this fund for your down payment.

2. Take loans but exercise restraint
There could be a situation where you are in urgent need of funds for the down payment. You could consider taking a personal loan to meet the need. Yet, you need to do this in a controlled manner. Having an existing loan will reduce your ability to take on, and repay, additional loans such as a home loan. You would find your finances stretched as you attempt to pay two EMIs at once. This isn’t an ideal situation to be in and is recipe for a financial disaster, in case you were to temporarily lose your ability to generate income. Therefore any loans for down payments need to be taken thoughtfully, and settled as soon as possible to reduce monthly EMI liabilities.

3. Mortgage another property
If you are confident that your current income can take care of EMIs of more than one loan, you could consider a loan against property. You can claim this loan against several options. For example, an existing property or home could be mortgaged. You could also claim it against assets such as shares, jewelry, PPF account, and LIC policies. There also exists the option of taking a loan against rent.

4. Withdraw from your PF account
As per the new EPFO norms, you are now allowed to withdraw up to 90% of your EPF corpus. Not just that, you could also withdraw from this corpus to pay for your EMIs. This scheme was recently implemented keeping in line with the Housing For All initiative of the central government. A word of caution: your PF corpus is meant to help you generate a pension income in retirement, so if you intend to redeem it for a property purchase, you must replenish it soon, or create a backup pension fund to meet your future needs.

5. Deferred down payment
You have the option of requesting a deferred down payment when purchasing a house from a well-known property developer. Under this, you will have the choice of dividing the down payment into multiple instalments. These instalments can be paid over a jointly agreed period of time. Let us say that you have to make a down payment of Rs. 10 lakh. Ask the builder for a time frame of five months to pay Rs. 2 lakh per month.

6. Liquidate your investments
Before you decide to make a property purchase, take stock of your savings, investments and assets. Anything from a vehicle to a part of a property you own can be liquidated for a down payment. Bank deposits, gold, mutual funds, shares etc. can be disposed. This should be carefully done so as to not disturb other financial objectives.

7. Approach an NBFC/ HFC
Non-Banking Financial Companies (NBFCs) and House Finance Companies (HFCs) provide loans that can help you cover a larger part of your fund requirement. For example, they may provide a loan to cover your registration and home repair costs as well. The entitlement of the loan, of course, will be calculated on the basis of your ability to repay.

Always remember to not act in a hurry. Think long and wise about the route you are taking to raise the down payment for your house. It is also advisable to wait and let an offer go if you cannot make the down payment, as there will always be another good offer in the future.

(The writer is CEO, BankBazaar.com)

Source : https://goo.gl/8ixiEW

ATM :: How to withdraw 90% of your provident fund to buy a house

May 12, 2017 | 11:39 IST | SOURCE : Economic Times | Retrieved from Timesnow.tv


In an effort to make its ‘Housing for all by 2022’ a success, the government has allowed for EPFO members to withdraw up to 90 percent of their provident fund (PF) accumulations to make down payments to purchase a house and to pay housing loan EMIs.

Pre-requisites for PF withdrawal

In order to dip into the provident fund saving, the new rule highlights that the PF holder will only be eligible if he/she has been a contributing PF member for at least 3 years, and is buying property in a registered housing society that has at least 10 members.

Further, the property has to be purchased in the member’s name and cannot be purchased jointly with anybody else, except your spouse.

How the money can be used

The money withdrawn can only be used for an outright purchase, as a down payment for a home loan, for buying plots or for the construction of a house. The transactions can be made through central government, state government and even from a private builder, including promoters or developers.

Can the money be used to buy resale flats as well?

Unfortunately no, EPFO will only make payments directly to a co­operative society, the state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more installments. The rule will not apply to real estate purchases in the secondary market or resale transactions.

Can you withdraw both employee and employer contribution?

An EPFO member can withdraw his own share of PF contribution plus interest as well as the employer’s share of contribution plus interest.

Can you EMI payment through PF?

A PF member can use his PF contribution to pay full or part EMIs for a home loan taken in the member’s name. The EMI will be directly paid by EPFO to the government, housing agency or the bank.

How to apply

A PF member can apply individually or jointly through a housing society to get a certificate from the EPFO.

Through Annexure I form, an employee can ask for the balance and the deposits made in the last three months before applying. This will help the EPFO determine how much EMI can be arrived at.

Also, the employee has to mention the name and details of the bank or housing society to whom such certificate is to be issued.


The EPFO then issues a certificate showing the outstanding balance and last three month’s deposit in the account. Alternatively, members can take printouts of their PF passbook downloaded from the EPFO website and submit it to housing agencies or banks.


If a member wishes to use PF money to meet EMI’s, then in addition to Annexure I, an authorisation by the member is to be filled in a prescribed format. It will carry details such as PF amount, PF and loan account number, lender name, address etc. One has to get this form authorised from the lender i.e. branch manager of the lender who has sanctioned the loan. Once approved, EPFO will start transferring EMI’s online to the lender’s account.


What if an employee leaves his/her job?

The EPFO has made it clear that under no circumstances would it be liable for any default of payments to the lender. The EPFO will not be party to any agreement made between an EPFO member and a society or builder.

In case a member quits his job, the responsibility of repaying the loan would rest with the employee and not the EPFO.


While dipping into your PF account to make a down payment makes your life easier, it is important to remember, your PF is meant to take care of your post­ retirement needs, and depleting it may jeopardise your retirement.

So make sure you have a backup plan to meet post­retirement needs through equity mutual funds or PPF.

Source: https://goo.gl/egUXjH

NTH :: Should you withdraw 90% from EPF account or take a home loan for buying your dream home?

The government has decided to allow Employees’ Provident Fund Organization (EPFO) subscribers to withdraw up to 90% from their EPF account for the purpose of purchase and construction of their homes. However, would it be a wise decision to withdraw money from your EPF account to buy a home or availing a home loan would be a better option?
By: Sanjeev Sinha | Updated: March 17, 2017 5:02 PM | The Financial Express


The government has decided to allow Employees’ Provident Fund Organization (EPFO) subscribers to withdraw up to 90% from their EPF account for the purpose of purchase and construction of their homes. However, would it be a wise decision to withdraw money from your EPF account to buy a home or availing a home loan would be a better option?

Experts say that buying your first home is rarely an easy task. Now the amendments to the EPFO suggested by the government would certainly allow more individuals to raise the funds needed for their home purchase. In that sense, it is a welcome move since it allows EPFO members access to their own funds in order to achieve a vital financial objective.

However, allowing the EPFO subscribers to withdraw up to 90% from their EPF account for the purpose of purchase and construction of their homes has its share of merits and demerits. “The use of EPF to fulfill these purposes would depend upon the quantum of provident fund deposits which would have accumulated over the years. Buying or constructing a home would require a lot of cash to be spent on as the costs to undertake the said activities can be very high. So, you must check how much EPF balance you have,” says Rishi Mehra, CEO of Wishfin.com.

On the basis of the balance, you can take a calculative decision. If the balance is on the higher side, say in lakhs, and you have more than a decade of the professional journey left before the retirement, you can use the reserve. But make sure not to consume the entire 90% as you can have a challenging post-retirement life to live.

For instance, if 70% of the retirement corpus is sufficient to buy or construct a house, you should consume only 20%-30% and opt for an attractive home loan deal to pay the remaining amount as required to buy or construct a house. This will allow the unused portion of the EPF balance to accumulate and enable you to lead a comfortable life post-retirement besides having a home.

However, “if 20%-30% of the EPF reserves is enough to serve your purpose of home buy or construction, then you can avoid paying the interest that comes with a home loan offered by the banks and housing finance companies (HFCs). If that is not the case, you can either avail a home loan or use both EPF and home loan. The latter option can reduce the interest liability to a considerable degree,” says Mehra.

For example, you have a PF balance of Rs 12 lakh and require a sum of Rs 20 lakh to pay to the property dealer to buy a house. You can then take out Rs 2.5 lakh-Rs 4 lakh from the PF deposits and avail a home loan of Rs 16 lakh-Rs 17.5 lakh. Now, look at the savings you could have using both deposits and loan over the option of loan alone through the calculation in the below table.

In the table, you can see the saving of Rs 2,250-3,599, Rs 2,89,836-4,63,737 and Rs 5,39,837-8,63,737, in EMI, interest payout and the overall payment, respectively, by preferring the combined option of PF and home loan over home loan only.

Pros of EPF Option
# It allows you to buy or construct a home without or paying a lower amount of interest.
# Beneficial for those who need few bucks to fulfill the purpose of buying or constructing a home.

Cons of EPF Option
# Retirement corpus gets used up for an expensive deal of home buy & construction.
# You are left with a very little or virtually nothing to enjoy post-retirement.
# Availing the PF option without having other savings could prove doomsday for your financial health.

Who Should Avail EPF & Who Should Avoid?
As far as who should use the provident fund deposit and who should avoid would depend upon the overall EPF contribution, the financial state and the goals of an individual. “Retirees, who have a huge bulk of EPF balance even after using a portion of the same for a home deal, would like this option. But for some who are in the middle of their professional life can’t go solely with the EPF option. These individuals would have to avail a home loan alongside EPF to find the key to their dream home. With this, they can enjoy an affordable home loan journey while securing their future at the same time. Newcomers would have to wait for a fair length of time before they can think of using the EPF for the home purpose,” says Mehra.

You should also note that the EPF’s primary purpose is to ensure income in retirement for its members. If you withdraw from this fund, you’ll miss out on the benefits of the great returns EPFO provides along with compounded growth over the long term. You’ll then have to find another way to regenerate your retirement fund, which is a challenging proposition. Also, “if you have a large EPF corpus, you can let it earn a handsome 8.65% per annum at the moment (with the possibility of earning higher in the years to come), and take a home loan which you can avail at interest rates around 8.6%. Taking a home loan also allows you additional tax savings through principal and interest repayments up to Rs. 350,000 per annum,” says Adhil Shetty, CEO, BankBazaar.com.

However, if we look at the development thoroughly, the government is also looking to allow EPFO subscribers to use their PF deposits as a mean to repay the home loan EMIs. Well, “to ensure you save for the future and at the same time reduce your interest liability, you should partly use the PF deposits towards the payment of the home loan EMI. The option of paying the EMIs partly through PF deposit could appeal to the most,” informs Mehra.

Source: https://goo.gl/hH2F5v

NTH :: EPFO may invest up to 15% of investable amount in equity markets

Sun, 19 Mar 2017-12:14pm | PTI | DNA India


Buoyed by the surging stock markets, the Employees Provident Fund Organisation (EPFO) may propose to invest up to 15 per cent of its investable amount in equity markets during the next fiscal, Union Labour Minister Bandaru Dattatreya said.

“We are proposing to invest up to 15 per cent during the next year. Central Board of Trustees (CBT) meeting will be held on March 30. We will seek its opinion. So far, during the past one-and-half year we have invested Rs 18,069 crore. We are getting good yield. It is encouraging,” Dattatreya told

Source: https://goo.gl/xcxAk6

NTH :: Centre to invest more PF money in equities

SPECIAL CORRESPONDENT | Updated: July 9, 2016 00:13 IST | Hindu Business Line


The Employees Provident Fund Organisation (EPFO) has earned 7.45 per cent returns from its equity investments since August last year due to an uptick in the capital market, Union Labour Minister Bandaru Dattatreya said.

A status report on equity investments has been sent to financial, investment and audit committee of EPFO and a final call on increasing equity investments will be taken in the next central board of trustees meeting to be held later this month.

“World over, the investments in exchange traded funds are going up. The investment in exchange traded funds will benefit in the longer run and lead to an increase in the rate of return we offer to our subscribers,” Mr. Dattatreya said at a press conference after the 213 Central Board of Trustees (CBT) meeting of the EPFO. He said the EPFO has invested around Rs.7,000 crore in exchange traded funds since August 2015.

Labour Secretary Shankar Aggarwal said the yield on investment in equity till date is “almost equal” to return on government securities investment. “Soon, we will take a decision on how much the equity investments should be increased,” the labour minister, who is also the Chairman of the CBT, said. He said a special CBT meeting may be held between 18 and 22 July to discuss the various proposals including increasing equity investments.

The EPFO started investing five per cent of its corpus in equities beginning August last year. It can invest up to 15 per cent in equity and its related instruments such as exchange traded funds.

Trade unions were not in favour of equity investment as they feared higher risk being involved due to market fluctuations. “We should not look at fluctuations. Ultimately, the interest rate in the long-term will be gainful. We are keeping the workers’ interest in mind but we are not going ahead in a hurry. We are moving forward cautiously,” Mr. Dattatreya said.

UTI to manage equity
UTI will manage the equity investments of Employees’ Provident Fund Organisation (EPFO) along with State Bank of India (SBI), Central Provident Fund Commissioner VP Joy said.

“We have decided to rope in UTI to manage our exchange traded fund investments along with SBI. We have not yet taken a final call on the proportion of funds that each of them will handle,” Mr. Joy said. The finance investment and audit committee of EPFO had proposed that UTI Mutual Fund be allocated 10 per cent of total ETF investments of EPFO and the rest 90 per cent be handled by SBI Mutual Fund.

The asset management companies in the race were: HDFC Mutual Fund, ICICI Prudent Mutual Fund, Reliance Mutual Fund, UTI Mutual Fund, SBI Mutual Fund and Kotak Mahindra Mutual Fund.

“Considering the fact that ETFs as an investment vehicle are relatively nascent in the Indian market, it would be prudent to invest only with asset management companies with majority ownership under public sector,” according to official documents.

Source : http://goo.gl/Q7bqln

NTH :: No tax deduction for PF withdrawals of up to Rs 50,000, says new notification

PTI | May 31, 2016 08:08 IST | First Post


New Delhi – No tax would be deducted at source for PF withdrawals of up to Rs 50,000 from June 1.

The government has notified raising the threshold limit of PF withdrawal for deduction of tax (TDS) from existing Rs 30,000 to Rs 50,000, a senior official said.

“The Finance Act, 2016 has amended section 192A of Income Tax Act, 1961 to raise the threshold limit of PF withdrawal from Rs 30,000 to Rs 50,000 for Tax Deducted at Source (TDS),” the notification stated.

The provision will come into effect from 1 June 2016, providing relief to subscribers of retirement fund body EPFO.

The government had introduced the proposal to deduct TDS on PF withdrawals in order to discourage pre-mature withdrawal and to promote long-term savings.

According to existing provisions, TDS is deducted at the rate of 10 percent provided PAN is submitted. TDS will be deducted at the rate of 10 percent provided PAN is submitted.

However, in case Form 15G or 15H is submitted by the member, then TDS is not deducted. These forms are to declare that their income would not be taxable after receiving payment of their PF accumulations from retirement fund body EPFO.

While Form 15H is submitted by senior citizens (above 60 years of age), Form 15G is submitted by claimants below the age of 60 years.

TDS is deducted at the maximum marginal rate of 34.608 percent if a member fails to submit PAN or Form 15G or 15H. However, there are certain exceptions to deduction of TDS by EPFO.

However, there are certain exceptions to deduction of TDS by EPFO. TDS shall not be deducted in case of transfer of PF from one account to another PF account.

Also, no tax is deducted if employee withdraws PF after a period of five years.

Source : http://goo.gl/smH1ab