Blog Article 2022 (3)

9 Bad Financial Habits to let go of this Dussehra

Dussehra is the festival that symbolises the victory of Good over Evil. I believe that every festival, every story coming from Mythology has a lesson behind it which helps us bring wisdom and goodness in us to conduct our lives in a better way. 

Ravana, who was an extremely wealthy and knowledgeable man, let his demons control his life and mind which lead to the great war and his eventual demise.In the same way, we have our demons that could lead to our destruction if we don’t work on getting rid of them.

One such habit is our life of living in denial about our financial habits. Let's work on some of these habits which are stopping us from enjoying our wealth to the fullest.

1. Having no Savings

“I will start saving only from next month, I can hardly meet my expenses this month”- said every new earner ever. 

No matter your age or how much you earn - If you have a source of income, you should have a portion of it saved. Many say that they do not have enough earnings and hence cannot save. We agree it is difficult to do so but you have worked towards it. Otherwise, No savings will lead to No financial future. To avoid being dependent on anyone for money ever, you must SAVE TODAY.

Watch our YT video to understand how you can start saving even with minimal income.

2. Buying things on debt 

‘This is a zero-cost EMI, I can buy things today. It is easy to pay EMI’s over the next few months’ - said every person who loves to shop.  

Avoid buying things on debt especially when it is a depreciating asset. There are few things like your house. Avoid debt for everyday items and travel. Remember, these small loans today can put you in a huge debt tomorrow. Make sure you pay your credit cards on time and please do not convert it into EMI - Credit cards attract the most interest if not paid on time. Watch our YT video to understand how credit card interest rates are calculated.

3. Having no Insurance

‘I don't need insurance today because nothing will happen to me, I am too young’ - said many overconfident youngsters. 

Things change, responsibilities change and nothing can stop from an accident or dangerous thing happening. The only thing you can do is protect yourself and your loved ones from the damage that it can cause. Like eating healthy is important, buying insurance is important. You can run away from these for only so long. 

Check out our article to learn about 5 Insurances that you must have. We also have a YT video on it - where we discuss the importance of having insurance.

4. Following social media investor tips

‘The reel by ‘Finance with XYZ’ was so much fun and I even learnt about this complicated product, I am going to invest in it right away’ said every newcomer on social media. 

A concept that takes years to master, cannot be understood in 60 seconds. YES, IT CANNOT BE. Yes, you can know about it, you will be introduced to it but you cannot invest your money basis this. 

Investing is PERSONAL not SOCIAL. So please be careful of where you put it and do your research. It's just easier to listen to free advice from random people and invest. Do your reading and learn and if you can’t, subscribe to a course and go to an advisor for better advice.

5. Procrastinating

‘Aaj Nahi yaar, I will start from this weekend pakka’ and that weekend never came!  This is one of the deadliest demons that we need to kill ASAP. Yes, it is difficult to focus on things we do not like, especially when it is difficult. Baby steps will help you to get started. 

Watch this video to get STARTED NOW. Know that Money may not be very important to you, but everything important in your life needs money. 


6. Timing the market

‘I will invest when the market corrects !’ ‘Oh market is too expensive, I will start investing only tomorrow when it's cheaper. Said every investor ever who thought they could get the investing right!

There is no right day or time to invest, TODAY is the best day to start investing. 

7. Investing Randomly

‘I got some money today ill invest in Equity, REITS also look good, I saw this video, I'll invest in the, read about the company - should buy some stocks of that’ A very common approach to invest randomly. 

8. Letting ‘Fomo’ take over you when investing

‘Yaar my friend made so much money in this stock, let me also invest in it’ - said every investor fool who bought stocks/funds after it had already gone up. What works for someone else, need not work for you. It is like not 2 people can rock the same dress, 2 people cannot enjoy the same returns. You have to invest in what works for you. Instead of FOMO, start today and invest regularly.

9. Falling for easy high returns

‘The returns from this fund are so good, I should invest in it right away’ - said every investor who broke his short term needs to chase higher returns. 

Remember the rule - High Returns = High Risk.  If you come across content stating assured return or stating unrealistic profit - it is a red flag - KNOW YOUR PRODUCT FIRST and ITS RISK AND THEN INVEST IN IT!

10. Not asking for help.

‘I will invest based on what I know, who will consult someone, it's too expensive anyway’ - said every investor who just lost 15,000 or more in wrong investments. There are experts for everything, you are just being stubborn by trying to do it on your own (without knowing all about it that you should know). Ask for help, as you go to a doctor for health, go to a financial advisor for your wealth.


Wealth Cafe Advice: 

The way Lord Ram could not kill Ravana by just killing one or 2 heads, you cannot improve your financial life, by just improving one or 2 habits, you must kill it at the nib of things by putting a process to your finances. Trying to improve one thing over another, will soon put you back in one of the traps mentioned above. All of these habits are very emotional, and conditioning driven and can be cured by putting a process to your Investments. 

Learn about this through our course - Namaste Money, currently priced at 50% off - check the link here  

Blog Article 2022 (1)

All about Second Instalment of Advance Tax Payment

Advance tax means income tax that should be paid in advance instead of lump sum payment at year-end. It helps the Govt. to receive a constant flow of tax receipts throughout the year so that the Govt can incur its expenses timely rather than receiving all tax payments at the end of the year. This keeps the government rolling

When and how much should you pay the second instalment of Advance Tax?

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Who is liable to pay Advance Tax?

The eligibility criteria you will have to fulfil in order to pay advance tax are:

  1. Your tax liability should be INR 10,000 and above.
  2. You should be a salaried or a self-employed individual.
  3. Income received via capital gains on shares.
  4. Interest earned on fixed deposits.
  5. Winnings are earned from a lottery.
  6. Rent or income earned from house property.

Exemption in Advance Tax Payments

  1. Senior citizens aged 60 years and above are exempted from paying the advance tax.
  2. Salaried individuals falling under the TDS net are exempted from paying the advance tax.
  3. However, any earnings from sources such as interest, capital gains, rent, and other non-salary income will attract advance tax.
  4. If TDS deducted is more than the tax payable for the year, then one does not have to pay the advance tax.

Payment of Advance Tax:

You can choose to pay advance tax by any of the following modes:

  • Offline Mode: You can pay advance tax using Challan 280 just like any other regular tax payment at bank branches authorized by the Income Tax Department.
  • Online Mode: You can also pay it online through the official website of the Income Tax department.
    In case you fail to pay advance tax, you will be liable to pay 3% of the shortfall - if the advance tax is more than 12% of tax).

However, it is important to note that no interest(penalty) is payable if the advance is tax paid on or before 15th September. Also, if the advance tax is less than 12% of the tax due for the year.

WealthCafe Advice

Advance tax is a good means to check your income, evaluate it and understand if you need to pay any taxes. Where you do come under the provisions of advance tax, best to consult the same professional for advice on the same.

Should I take a travel loan for my travel plans?

A loan may seem like your ticket to a dream vacation when you lack the cash to cover the hefty price tag upfront. A vacation loan is simply another name for a personal loan you use for travel.

But looks can be deceiving.

That vacation loan you use to finance your seven-day trip could leave you shackled to debt for years and affect your ability to obtain credit when you need it.

Before you take out a travel loan, read the fine print. What appears to be a good deal may not be once you look closer at fees and interest rates.

Reasons to Say No to a vacation loan

Discretionary spending isn't a good reason to borrow money

We'll start with the biggest vacation loan problem: Buying gifts, traveling, and any other vacation expenses you incur are discretionary expenses. When you take out a vacation loan, you're paying interest for things you want, but don't need.

Even if you have excellent credit and qualify for the best personal loan rates, you'll still go into unnecessary debt. You're putting your future self in a more difficult financial situation so you can have what you want right away instead of saving for it.

You could go over budget and borrow more

Let's say you get a vacation loan for an amount you think will cover all your expenses. What if those expenses end up being much more than you bargained for?

Depending on the situation, you may be able to rein in your spending. If you took out a loan to buy gifts, you could look for more economical options. But what if you borrowed money for a vacation trip and you realize halfway through the trip that it's going to cost more than you thought?

You could find yourself borrowing more for those unexpected vacation costs, putting you even deeper in debt.

It makes your holidays more stressful

The whole point of a vacation loan is to enjoy your holidays, but that's hard to do when you're worrying about how you'll pay back what you borrowed and what your bank account will look like after the fact.

If you think you'll be able to push these thoughts out of your head while you celebrate, the odds aren't in your favor. Among people in debt, over half think about their debts at least several times per week and over a quarter think about them every day. 

Loan payments make it difficult to save money

When you don't have much money saved, building your savings should be your No. 1 goal. You'll be better prepared for emergencies and future expenses that way.

The more bills you need to pay each month, the harder it is to save. If you get a vacation loan, those loan payments will hold you back from saving money.

It could become a bad habit

I've mentioned why borrowing money for discretionary expenses isn't a good idea. Another reason why you should avoid this is that it often turns into a habit. Once you've borrowed money for something you don't need, it gets easier to do it again.

Here's an example of exactly how this could happen with a vacation loan. You decide to get a 12-month vacation loan this year. Because of your loan payments, you can't save much. By month 11, you need money for the holidays all over again.

At best, you're back to square one -- it's the vacation season and you're short on cash. That's assuming you took out a 12-month vacation loan. If you got a loan with a longer-term and only made minimum payments, you're in an even worse position.

Vacation Loan Alternatives

The risks that come with vacation loans aren’t worth the financial consequences. There are other strategies you can use to put money aside, take that dream vacation, and avoid taking out a personal vacation loan, including:

  • Cutting back on expenses. If you know you want to take a vacation next year, start planning ahead and looking at your expenses. Ask yourself: Is there anything that I am spending money on that I don’t need? If and when you find areas where you can cut back on your spending, set that extra money aside in a savings account to help fund your vacation.
  • Automating your savings. Saving for any type of expense or investment is much easier when you use an automated system - SIP'S. Plan your budget and start your SIP today!
  • Creating a travel budget. Setting extra money aside is one way to set yourself up for success. Creating a travel budget is another. If you don’t know how much your vacation will cost, how will you know how much you need to save? Examine the costs of transportation, accommodation, tourist attractions, and restaurants to give yourself a good idea of how much money you should tuck away.
  • Utilizing credit card rewards. Credit cards are a handy way to earn rewards on the money you already plan on spending. By opening an airline credit card you can earn a bonus worth a free flight or two. Keeping your eyes peeled for cheap flights. There’s a method to the madness when it comes to snagging a solid deal on flights. While it can feel like luck of the draw, if you know where to look, you can score big. Using a resource to find cheap flights, is an easy way to track down a ticket that can lessen the dent in your wallet.

Wealth Cafe advice:

The best way to enjoy a vacation is to always plan well in advance. When your finances are built up, it would be the right time to embark on the trip. The idea of buying now and paying later could be an appealing alternative but there is no point to make your holidays costlier than necessary as it leads to financial stress later on. In the end, it is much of a personal choice in determining how much the vacation is worth to you. A few days of joy that lead to a loan hanging around your neck for the next few years may not be the best idea.

Loans should always be for necessities, assets, and emergencies. If it's for luxury, one may be living beyond their means.

To learn more about saving and investing enroll in our course: NM 101- Maximise your Savings

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8 Easy Ways To Reduce Your Expenses

Spend less than you earn. That’s the mantra of personal finance success. Every week, month, and year that you spend less than you earn, the more you save and the better your financial situation will be.

A big part of that solution is cutting back on spending, and for many people, the thought of cutting back on spending seems unpleasant. Losing out on the things that bring you pleasure in life seems like a pretty steep price to pay for a little financial success.

The secret is to intentionally target spending on the things you don’t care about and rarely use while holding steady on the things you do care about.

Scale back on entertainment costs
1. Cut cable: These days, streaming services and free over-the-air television provide more content than any one person could ever watch. Take advantage of the variety by eliminating cable service.
2. Focus your interests on finishing rather than collecting: Rather than collecting physical or digital items in a media collection, focus on actually finishing those things or enjoying them to completion. For example, instead of buying yet more books that go unread, aim instead to build a long list of books you have read. Make doing the center of your hobby, not buying. After all, isn’t that what you really love?
3. Don’t treat shopping as entertainment: It’s fine to go out in the town to be entertained but keep to a simple rule: don’t go into a store unless it’s for the purpose of buying something you’ve already decided you need before going in. Don’t go to stores just to browse for entertainment, as they’re designed to convince you to buy things you don’t need or even really want, but just react on impulse. Find other places to be entertained.

Reduce your food costs
4. Use a meal plan and make a grocery list: Instead of going to the grocery store whenever you feel like you need food, get into a routine of making a meal plan once a week, then constructing a grocery list from that plan. The time invested in making that plan is more than saved by spending less time in the store and having a list to stick to saves a ton of money on grocery store impulse buys that just sit in your pantry.
5. Learn how to cook: Cooking for yourself doesn’t have to involve three-course meals or Gordon Ramsey-level skills. Start by identifying things you enjoy eating, then look for how to easily prepare it from scratch and with basic ingredients.
6. Buy in bulk: The big bulk packages might seem like they have a high price, but they’re usually quite a bit cheaper per use, meaning you get more value for your dollar. If you frequently buy something at the store, look at the big bulk versions and save up for them. You’ll save over the long run. It's basically what our parents or grandparents did - buy - store and use efficiently.
Cut your monthly bills
7. Go through your bills: Sit down with every regular bill you have and go through it line by line, making sure you understand everything you’re being charged for. If something isn’t clear, Google it. If it doesn’t seem like something you should be charged for or is a service you don’t want, call the bill issuer and get it removed from future bills.
8. Cut your subscriptions down to just the things you actually use: If you have a subscription or membership that you haven’t used in the last month, cancel it. Turn off any auto-renew you have with that service and allow it to expire. You can always renew it in the future if you decide you have a need for it again.

What you should do with the money saved from trimming your budget?
The key to making frugal living tips really work for you is to not simply spend that money on something else fun. Keep your “fun” spending at the same level and use the money you save when you cut down your monthly budget on something smarter.  Cut un-fun things like your energy bill for something financially useful that can build a bright future for you.

One great option is to open an account and use your savings to create your emergency fund or you could save it up for your next trip. Whatever excites to reduce your unnecessary spending. These are just some of our suggestions. Do let us know what you had like to read and learn more about and we shall share more content on that.


Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.


Leave Travel Concession Cash Voucher - new ways to claim your LTA

Hello fellow investors,

It is that time of the year where we all start planning to submit your tax proofs to claim tax deductions. One such claim is the Leave travel allowance. Given that, none of us are really venturing into travel, a new component of leave travel concession - a cash voucher was introduced for salaried individuals.
This leave travel allowance (cash voucher) scheme initially announced for central government employees has now been extended to all other employees with riders to boost consumption during the festive season and also help you get tax deduction. The government has announced that all non-central government employees will be eligible for income tax exemption for the entire leave travel concession amount up to Rs 36,000 per person without producing travel bills. However, such employees will have to spend three times the amount for purchasing goods or services on which GST of 12% or higher is levied, said a press release from the Central Board of Direct Taxes.
Employees will have to make purchases through digital payment mode and submit the invoices to avail of the benefit.
What’s LTC For Private Sector? 
Unlike government employees, their private-sector peers have a part of their salary or cost to the company, structured as leave travel concession. This is done to save tax on the total income of the employee. By showing travel expenses, the employee can avail of the income tax exemption on the travel amount. Those who haven’t availed of this benefit during 2018-21 would be eligible for the tax exemption.
Points to Note:
  • The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the current block (the year 2018-21); 
  •  The employee spends a sum equal to three times the value of the deemed LTC fare on purchase of goods/services which carry a Goods and Services Tax (GST) rate of at least 12% from GST registered vendors/service providers through digital mode; 
  • The expense is made between 12 October 2020 and 31 March 2021; and 
  • The employee obtains the voucher indicating the GST number and the amount of GST paid.  
What Government Is Offering An employee?

An Employee who has not availed LTC during 2018-21 would be eligible to avail of the tax exemption subject to the condition that the person spends three times that amount on goods or services with GST of 12% and above.


Those who spend less than three times the fare amount will get proportionate income tax exemption. For example, if the LTC fare is Rs 20,000, and is claimed for a family of four, then the employee would get Rs 80,000 (20,000 x 4). The amount that the employee will have to spend would be Rs 2,40,000 (Rs 80,000 x 3). However, if the employee ends up spending only Rs 1,80,000, the person would get  tax exemption of Rs 60,000 (75% of 80,000 or 1/3 of 1,80,000).
Thus, this income tax benefit may actually be considered as a discount on expenditure, which the employee has already planned to incur, instead of a reason to incur expenditure. On the other hand, income tax foregone by the Government may be offset by the additional GST revenue on expenditure incurred by the employees.
It is advisable to check with your HR department and your employer to see if the policy is modified to include the leave travel concession component and how you can claim this benefit for yourself. It was initiated to encourage people to shop more and take tax benefits on the same, so don't rush to buy new items but if you are buying anything, ensure you have GST documents of the same to claim tax benefits under LTC.  


A Fixed Interest Of 8.5% With Low Interest- Invest Now?

Hi fellow investors

Have you recently checked returns of debt investment options like Fixed deposits/Liquid Funds? I am sure you would have been very disappointed by the return numbers there.  The approx interest from some of the popular debt investments today are::

1. Overnight/Liquid Debt Funds (Up to 90 days): 3.5% - 4.0%
2. Short term Debt Funds (1-3 yrs): 5.5% - 6.5% 
3. Fixed Deposits (1-5 years): 5.5% - 6.5%
4. Bharat Bond ETF (5-year bond) - 5.46%
5. Public Provident Fund (PPF) (15 years) - 7.1%

Clearly, the returns have reduced by 3%-5% across different debts in the past few months and debt as an investment category doesn't look very attractive. With the latest inflation number hovering at 6%, our money invested in the above debt options barely covers the impact of inflation on our expenses.

What if I told you that there was an option to earn 8.5% per annum?

For salaried fellow investors, it is something you deal with every payslip; Employee Provident Fund (EPF), giving an interest rate of 8.5% (for FY 2020-21) which is not only risk free, but also tax free. 

How can you make the most of it? 

If you are a salaried individual and your company has a provident fund and you have not opted for EPF,  you could opt for it as in the current market scenario no other debt investment is giving returns as high as 8.5% p.a.

1. Maximize your EPF Limit 

 If you are just contributing only INR 1,800 (the minimum required under EPF rules) towards your EPF account, you could consider increasing it making it to 12% of your basic salary. That way you can make the full use of the EPF limit available to you.

2. Invest as VPF (Voluntary Provident Fund) 

Where you are already investing 12% of your Basic Salary towards EPF and want to invest more to earn 8.5% you have an option to increase your contribution in EPF by opting for VPF (Voluntary Provident Fund). You can invest an amount up to your entire 'Basic' salary with the EPFO and earn the same interest rate of 8.5%. Please note your employer is not obliged to match this higher contribution and hence, it is called a 'voluntary' provident fund.

Features of VPF that you must know of 

  • It will earn you the same interest as your EPF i.e. 8.5% per annum (currently)
  • It will have a lock-in period of 5 to 10 years but you can withdraw for some specific reasons. Check out when can you withdraw from your EPF here.
  • Your employer will not match the contribution of your VPF unlike EPF
  • our contribution to VPF is eligible for tax deduction under section 80C.
  • The interest earned from VPF would also be tax-free (provided it is not withdrawn within the first 5 years).

So, if you have funds that you want to invest in risk-free investments and can park it for a while, (EPF + VPF) is a good debt investment option and can be mapped to your retirement goal. 

How much should you invest in VPF?

We are not advising you to invest your entire salary as VPF and have no money to pay your bills or cover your short term goals. We also don't want you to miss out on your equity investments that result in wealth creation over the long run. You can compute how much to invest as your VPF as under:

For example, if your in-hand salary is INR 1,50,000 per month (A basic component of INR 50,000):  

  • 12% of your basic salary i.e. INR 6,000 would be invested as your EPF.
  • A matching amount of INR 6,000 will be contributed by your Employer.
  • If your monthly expenses are INR 100,000, you have a monthly savings of INR 62,000 (INR 50,000 + INR 12,000).

Now if you are looking to invest in VPF, the lower of the 2 parameters will help you compute the same.

Limit I: 
Not more than 40% of your total portfolio holding should be in illiquid investments (Know about the step-by-step process to withdraw your EPF). You can ensure this by not contributing more than 40% of your monthly savings towards Illiquid investments.
Accordingly, 40% of your savings (INR 62,000) will be INR 24,800 out of which INR 12,000 is already invested as EPF. So the balance you could additionally invest is INR 12,800 as per this.

Limit II: 
It should be considered as a part of the contribution you make towards your retirement goal. Now if your retirement goal requires you to invest 18,000 per month for the next 25 years to achieve your corpus to retire peacefully (based on Wealth Cafe Investing tool) and you are already investing INR 12,000 from the EPF, then only the balance of INR 6,000 should be invested towards VPF.

Limit III:
You are already investing INR 12,000 towards EPF. A maximum of another INR 38,000 can be invested by you in VPF.

Based on the above limits, INR 12,800 or INR 6,000 or INR 38,000 whichever is lower can be additionally invested in your VPF.

For simplicity sake, the above computation assumes that you are not investing your money in any other illiquid investments and are not saving for your retirement in any fund apart from EPF and VPF. If you are doing so, the amount invested in that could be reduced from the amount arrived at in Limit I & II above.

Another advantage of using the VPF route is that it is invested directly from your salary and then the balance salary comes to you, ensuring the consistency of your investments. 

Do review your numbers and you will have to contact your HR/accounts team to start contributing to VPF. Let us know if you have any questions about this in the comments section of our blog.

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.


How to check EPF balance?

There was a time when checking your EPF balance or withdrawing the same was a very tedious task. People had to write endless emails, follow up with their employers, Employee Provident Fund Organsation (EPFO) etc. to obtain the information.

The process is now available online and you can check your EPF balance through the following means:

EPF passbook with UAN:

The UAN is a 12-digit number allotted to each Employee Provident Fund member by the EPFO which gives him control of his EPF account and minimizes the role of the employer. UAN number activation started in Oct 2014. You can download the EPF passbook if you have activated your UAN number. Refer our Article on UAN for a step by step process to view the same.

EPF UAN passbook is available at http://www.epfindia.gov.in  >> Our Services >> For Employees >> Member Passbook or e-Passbook on right hand side of the home page of EPF.

e-Passbook contains transaction details of an individual’s account

You can also download the e-passbook in .pdf format.

This facility is to view the Member Passbook for the members registered on the Unified Member Portal.

Passbook will be available after 6 Hours of registration at Unified Member Portal.

Changes in the password at Unified Member Portal will be effective at this Portal after 6 Hours.

Passbook will have the entries which have been reconciled at the EPFO field offices.

Passbook facility is not available for the Exempted Establishments Members / Settled Members / In-Operative Members.

Check EPF balance with Umang App

Download Mobile App ‘Umang’ from Google Play store. You can also view your monthly credits through the passbook as well view your details available with EPFO.

Unified Mobile Application is an evolving platform designed for citizens of India to offer them access to the pan India e-Government services from the Central, State, Local Bodies, and Agencies of government on app, web, SMS, and IVR channelsIt will integrate almost 200 government services by 2019 across departments, allowing people to work seamlessly with the government.

It is available as a website https://web.umang.gov.in/ and as a mobile App on Android, Windows and iOS platform. Download the Umang app from your respective app store such as Google Play Store for Android users.

Once you have the app follow the below steps to view your EPFO transactions:

  • Select EPFO
  • You will find three types of services namely – Employee Centric, General services & Employer centric services.
  • Select Employee Centric Services.  You will see View passbook, Raise claim & Track Claim
  • By Clicking View Passbookyou can see the passbook.

EPF Balance by Missed Call 

If you have a valid UAN, your mobile number too will be registered with the EPF department. A missed call to 011 229 01 406, at no cost, will ensure that you receive an SMS that lists down your PF number, age and name as per the EPF record. This facility is available only to UAN members. You must register yourself on UAN to avail this service.

EPF balance by SMS:

If your UAN is registered with EPFO, you can get details of your latest contribution and the PF balance by sending an SMS to 7738299899. You need to send this message: EPFOHO UAN ENG. ENG is the first three characters of the preferred language. So, if you want to receive the message in Marathi, then type in EPFOHO UAN MAR.

The facility is available in English, Hindi, Punjabi, Gujarati, Marathi, Kannada, Telugu, Tamil, Malayalam, and Bengali. It has become very easy to check balance of your EPF account. Checking it regularly and reviewing it upto you as an investor.    


Risk Involved in Investing in Debt

Risk refers to uncertainty in returns. Debt instruments are considered less riskier than Equities because there is a lesser uncertainty in the returns one can expect from Debt Instruments. Never the less, following are the major risks are involved in investing in Debt Securities.

Interest-Rate Risk

Fixed income securities such as bonds, debentures and money market instruments face interest-rate risk. Generally, when interest rates rise, prices of existing fixed income securities fall and when interest rates drop, prices of fixed income securities increase.

For example: If a Rs. 100 par value security offers 9% rate of return, and the prevailing rate of interest increases from 9% to 10%, the values of the security will fall below Rs. 100 because it offers a lower rate of return(9%) compared to the market return(10%). The extent of fall or rise in the prices depends on the existing coupon rate, time to maturity of the security and the quantum of increase or decrease in the interest rates.

Credit Risk

In simple terms this means that the issuer of a debenture/bond or a money market instrument may default on interest payment or in paying back the principal amount on maturity. Even if no default occurs, the price of the security may go down if the credit rating of the issuer of the debt instrument goes down.

Investment in Government securities has zero Credit Risk as the Government is not expected to default on its obligations.

Liquidity Risk

This refers to the ease with which a security can be sold at or near to its market value. Liquidity risk can be measured by the difference between the buy price (bid price) and the sell price (offer price) quoted by a dealer. Larger the difference, greater is the Liquidity Risk. Indian Debt market has a higher Liquidity risk compared to Global Debt market, because of low trading volumes in the Indian Debt market.

Reinvestment Risk

If interest rates fall, the coupon payments being received on fixed income securities will have to be re-invested at the lower prevailing interest rate. This is known as Reinvestment Risk.

For example: If you are receiving 9% coupon on a fixed income security, and the prevailing interest rates are 7.5%, the coupon payment received will have to be invested at the lower rate of 7.5%.

As zero coupon securities do not provide any periodic interest payments they do not have Reinvestment risk. However, they have a higher interest rate risk.


Basic of Employee Provident Fund (EPF)

“Every month I save my salary into EPF and it is a great form of investment” I have heard this way too many times. When I asked them if they knew what EPF is and how is EPF a great investment? Not many people were able to answer this question.

People just know that 12% of their salary goes into an EPF account and it is  a great form of investment and savings.  EPF being a primary investment for salaried individuals, you must know everything about it. Hence, we have written a detailed article about everything that you would want to and must know about your EPF investments.

What is EPF?

EPF is retirement benefit scheme that is generally available to all salaried employees and forms an important tool for financial planning.

Basically, EPF is like a guaranteed investment as the amount is deducted from your salary before the same is paid to you and invested. You might skip on your SIP or Insurance premium, but your EPF will be deducted from your salary each month.

Regulatory guidelines

Under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, EPF has two components namely Employees’ Provident Fund Scheme 1952 and Employees’ Pension Scheme 1995 (EPS). These are two different retirement saving schemes under which any salaried individual is covered if he/she is drawing more than INR 6,500 per month as basic salary.


There are 2 contributions into the EPF.

  • Employee, 12 % of your basic salary (and DA if any) is invested into the EPF account.
  • Employer contributes further 12% of your basic pay from his side into the EPF.
  • Thus, total of 24% of your basic pay (plus DA, if any) is invested each month..

Contribution to EPF & EPS

There are a few components of EPF such as below.

SchemeEmployee’s Contribution of basic pay (+ DA if any)Employer’s Contribution of basic pay
EPF12% of basic pay3.67% (where salary is upto INR 15,000)
  12% of basic pay less 1250 towards EPS (where salary is more than INR 15,000)
EPSNil8.33% of basic (where salary is upto INR 15,000
  INR 1250 per month (where salary is more than INR 15,000)
EDLISNil0.5% (capped at maximum of INR 15,000)

EPF – Employee Provident Fund

  • The money contributed towards EPF is invested and managed by a trust and the employee earns interest from 8% to 12% on the same (depending on the results of a specific year).
  • The corpus of EPF is received as a lumpsum amount on fulfillment of certain conditions.
  • Entire Employee’s contribution goes towards EPF.
  • A part of employer’s contribution goes towards EPF.
  • Where the salary is INR 15,000 3.67% of the same is contributed towards EPF.
  • Where the salary is more than INR 15,000, the employer has an option of investing INR 1250 towards EPS and balance towards EPF and EDLIS. The same depends upon the Employer.

EPS – Employee Pension Scheme

(Refer our Article on EPS )

  • EPS offers pension on disablement, widow pension, and pension for nominees.
  • No interest is earned on EPS. If your corpus of INR 3 lakhs is accumulated through EPS, you would get INR 3 lakhs as pension money.
  • No amount from the employee contribution goes towards EPS.
  • A part of employer contribution goes towards EPS.
  • Where salary is INR 15,000 or more, 8.33% of INR 15,000 is compulsory contributed towards EPS i.e. INR 1250 each month is to be contributed to EPS.

EDLIS – Employees Deposit Linked Insurance Scheme

(Refer our Article  on EDLIS )

  • Provides for a lump sum payment to the insured’s nominated beneficiary in the event of death due to natural causes, illness or accident, while in job.
  • Premium for the EDLI is entirely funded by the employer, which contributes 0.5% of monthly basic pay (capped at a maximum of INR 15,000) as premium for life cover in case the organization does not have a group insurance scheme for its employees.
  • Maximum amount insured under EDLIS is INR 6 lakhs.
                                                                                                  is a risk free, tax free long term debt investment.

Tax benefits

The employer contribution is exempt from tax up to 12% contribution while employee’s contribution is eligible for tax benefit under Section 80 C of the Income-Tax Act, 1961. EPF is under the EEE norm currently indicating that the money invested, interest earned and the money withdrawn after a specified period (5 years) are all exempted from income tax in the hands of the employee.


EPF provides you with nomination facility whereby mother, father, spouse or children can be nominated for receiving the proceeds at the time of death of an employee. Government, currently, doesn’t allow nominating siblings.

Transfer and withdrawal policy

  • If a person is not employed for two months at a stretch, there is a provision by which he/she can choose to withdraw EPF.
  • It is advisable to transfer the existing EPF with previous employer to new employer while switching jobs.
  • The process of transfer of EPF is now seamless with the introduction of Universal Account Number (UAN) which is discussed in detail in subsequent para.
  • If you withdraw the EPF amount before completion of five years with an employer the corpus withdrawn is taxed as per your current income tax slabs as the amount withdrawn is then added to your gross salary.
  • Further, withdrawal is generally not permissible if the person is still working.
  • Withdrawal is possible in following cases: children’s higher education, marriage, medical treatment, home loan repayment, construction of house, purchase of flat, etc.
  • Non-refundable advances are also allowed after having completed minimum five years of membership.
  • In case your service is less than 10 years and you have opted for withdrawal on account of no job, an employee is entitled for 100% of EPF including interest on EPF. In addition, employee is also entitled for receiving EPS contribution that is computed based on withdrawal benefit (on pension). Refer our Article on EPS to understand the same in detail.

Receiving pension

An employee start receiving pension from EPS amount after completion of minimum 10 years of service and attaining the age of 58 or 50 years. The pension amount is payable to the subscriber until he is alive and in the event of death of the employee, members of his family -whoever is nominated is entitled for the pension. Monthly pension is determined based on ‘pensionable service’ and ‘pensionable salary’ for which the following formula is generally used:

Monthly pension = (Pensionable salary X Pensionable service) ÷ 70

It is worth noting here that the pensionable salary is nothing but your basic salary on which you have paid EPS premium. Thus, monthly pension will have received will be nowhere closer to real CTC.

Top-up on EPF (Voluntary Provident Fund)

Yes, you can always invest more than 12% of regular contribution. However, any amount over and above EPF is termed as Voluntary Provident Fund or the VPF. In this case the excess amount is invested in EPF and is eligible interest benefit.

UAN services and other recent developments

UAN is a unique number assigned to an employee and it indicates that the subscriber is availing Employees’ Provident Fund Organization (EPFO) service. EPFO generally manages the money in your EPF account.

UAN number is fixed throughout the lifetime and has portable flexibility. Thus, when an employee changes job his new EPF account which will have different account number and will be opened by new employer can be linked directly to UAN.  Thus, UAN acts as an umbrella of multiple EPF IDs allotted to an employee by different firms.

EPFO, in a recent development, introduced the facility of linking Aadhar (unique id) to UAN. This would help the member avail facility in a better and seamless manner. The facility is available at the official website http://www.epfindia.gov.in under Online Services section.

Benefits of Linking UAN With Aadhaar

  • Receive monthly updates on registered mobile number
  • Download e-passbook anytime
  • Submit claims directly to EPFO without any mediation of employer
  • Link multiple EPF accounts allotted over the years
  • Edit and update personal details

Refer our Article to understand the interest calculation on EPF and the amount due to you over a period of time.

EPF contribution is definitely one of the best investments for retirement. It is risk free, tax free, long term debt investment which gives approximately a return of 9.7% post taxes and helps salaried people to build on a corpus for retirement or any other financial need over the long term.

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