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Employees whose basic salary is greater than INR 6,500 per month can opt to receive an employee provident fund amount limited to 12% of INR 6,500 i.e. INR 780 per month. This would increase the take home pay for such employees.
Though this suggestions looks attractive at first sight, there are several drawbacks.
- You loose your employer’s matching contribution. If your basic salary is a significant amount, you stand to loose a significant amount of free money.
- You loose the income tax exemption benefits that you would have otherwise gained with a higher employee provident fund contribution. In other words, your take home pay doesn’t really increase as much as you expect it to.
- You loose the benefit of automatic savings — each month.
Unless you desperately need the few — if any — extra rupees each month, it’s always a bad idea to opt for a decrease in your EPF contributions in lieu of a [hypothetical] increase in your take home pay. And remember, the truth always lies in the calculations.
What do you think?
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