A READY RECKONER FOR A RAINY DAY

India Today|June 08, 2020

A READY RECKONER FOR A RAINY DAY
The worst mistake in a financial crunch is to prematurely encash FDs, redeem mutual fund investments or sell gold when there are smarter options to source funds
Aprajita Sharma

The COVID-19 outbreak and the national lockdown that has followed have inflicted deep financial wounds on people. Scores have lost their jobs and equally high numbers of workers have had to take pay cuts. Entrepreneurs have suffered heavy losses or shut down their businesses. Then there are those who have been infected by the virus itself. Crises like these invariably force people to make unexpected withdrawals from their investment corpus, as not everyone maintains an ‘emergency fund’.

However, the choice of the investment to be encashed needs to be wise and one must look beyond conventional ideas, such as encashing fixed deposits (FDs), redeeming mutual funds or selling gold jewellery. Here are some of the best options available to meet financial exigencies.

WITHDRAWAL FROM EPF, PPF

If you don’t have an emergency fund or are falling short despite dipping into what you had saved for a rainy day, you may consider withdrawing some amount from your EPF (Employees’ Provident Fund) corpus. To cushion the impact of COVID-19 on the lives of people, the central government has allowed EPF subscribers to withdraw up to three months of their basic salary and dearness allowance or 75 per cent of their EPF balance, whichever is lower. Any such amount withdrawn will not invite tax. In case of job loss, you can withdraw your entire EPF balance two months from the last day at work.

Those who hold PPF (Public Provident Fund) accounts can make partial withdrawals from the seventh year onwards. However, only 50 per cent of the account balance at the end of the previous financial year or 50 per cent of the account balance at the end of the fourth preceding financial year— whichever is lower—can be withdrawn. Like EPF, this withdrawal, too, is tax-free. PPF accounts have a 15-year timeframe. However, they can be closed prematurely after five financial years if the account-holder or an immediate family member is suffering from a life-threatening ailment or if any key goal, such as children’s higher education or their marriage, needs to be funded.

LOAN AGAINST PPF

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June 08, 2020