Is Contributing to PF Better Than Keeping Money in the Bank? Let's Discuss the Benefits and Interest Rates

I would like to know what the benefit is of contributing the amount to PF. Instead, could the same amount be kept in the bank? Additionally, I would like to understand what interest would be received on this amount.

Provident Fund Scheme in India

The Provident Fund (PF) is a scheme by the Government of India where a portion of an employee's salary is deducted, and an equal amount is contributed by the employer. This combined amount is kept in a PF account and accumulates monthly. A yearly 9.5% compound interest is paid on this amount. The total amount, along with the interest, is given back to the employee at the time of retirement or resignation. Additionally, the employee can withdraw a non-refundable amount for specific purposes such as children's education or marriage, purchasing immovable property, or seeking treatment for illness.

These facilities are not provided by banks, even though the schemes are different. If you keep the same amount in a bank, the employer's contribution will not be present, and the interest rate is also higher compared to bank interests in PF. For further details, you can search on Google.

Yes, I agree with Shreekant, and I would like to share one more thing. In some companies, employees can raise their PF contribution up to 100% of their Basic salary, while the employer will contribute only 12%.

In addition to what Mr. Shreekanth P.R. stated, the PF contribution and its interest are exempt from Income Tax, whereas bank deposits are subject to Income Tax.

Abbas P.S