Want to withdraw money from PF? If you withdraw ₹10,000, you will lose ₹1 lakh 10 thousand 220 in your retirement fund - see calculation..

The government has provided the facility of online withdrawal of money from the PF, i.e., Provident Fund. But many people withdraw money from their PF account even without any major need. This ends up depleting a large part of their retirement fund. The 8.25% annual compound interest received in PF increases the amount manifold over time. In such a situation, even a small amount turns into lakhs over time. Here we are showing you the latest calculation of how much loss will be incurred after 20 and 30 years on withdrawing 10 thousand, 50 thousand, or 1 lakh rupees from the PF. Also, we will know in easy ways how funds can be raised without breaking the PF when money is needed.

The whole game is about the 'magic of compounding'

On withdrawing money from PF, the loss is not only of the withdrawn amount, but also of the "interest on interest" received on that amount for the next 20-30 years. This is called compound interest or the power of compounding.

Understand it like this - it is like a small snowball which keeps gathering more snow as it rolls down the mountain, and by the time it reaches the bottom, it becomes a huge ball. When you withdraw money from the PF, you remove a part of that snowball forever, due to which it can never become huge.

PF Withdrawal Loss Calculation (Interest 8.25%)
Amount withdrawn (Rs) Amount received less after 20 years (Rs) Amount received less after 30 years (Rs)
10,000 49,310 1,10,220
20,000 98,620 2,20,440
50,000 2,46,550 5,51,100
1,00,000 4,93,100 11,02,200
2,00,000 9,86,200 22,04,400
3,00,000 14,79,300 33,06,600

Note: This calculation is based on 8.25% annual compound interest. Interest is compounded annually, and actual returns will depend on the contribution, interest rate, and investment period.

Why is withdrawing money from PF the last option?

Money management experts always advise against touching PF. There are some solid reasons for this.

1. Guaranteed high return
The guaranteed and almost tax-free return of 8.25% is much higher than any other safe investment scheme (like FD, NSC) today.

2. Discipline
Because of mandatory deductions, it keeps your savings habit intact.

3. Basis of pension
A part of your PF contribution (8.33%) also goes to the Employees' Pension Scheme (EPS), which gives you the basis of a monthly pension after retirement.

Why not withdraw money from the PF
The purpose of PF is to create a strong fund for your retirement.

The amount multiplies manifold over time due to 8.25% compound interest.
The larger the amount you withdraw, the bigger the loss in the future.
The interest on PF is tax-free, which means the entire benefit goes to you. How much money is deducted from PF?

The employee deposits 12% of salary and dearness allowance (Basic + DA) in PF.

The company also contributes 12%, of which 3.67% goes to EPF and 8.33% to EPS.

This amount increases every month, and interest is added annually.

How to arrange money without breaking the PF

1. Take a gold loan

All major banks, including SBI, PNB, and BoB, offer gold loans.

- You can take a loan of up to Rs 20 lakh by pledging gold.

- Interest rate between 7% to 9%, cheaper option than breaking PF.

2. Take a loan against an FD

If you have a fixed deposit in the bank, you can take a loan by paying 1–2% additional interest on it.

- Most banks offer loans up to 90% of the FD value.

- The process is easy; no CIBIL check is required.

3. Loan against a credit card
Many banks offer pre-approved loans to cardholders.
The process is fast, but check the interest rate as it can be higher than a personal loan.
Money management tip
Touch the PF only in case of an emergency.
Use other options for small needs.
Keep contributing to PF regularly, so that a large amount is ready at the time of retirement.
Conclusion: PF is the safest retirement fund
Withdrawing money from a PF account gives immediate relief, but it proves to be a huge loss in the future. At an 8.25% interest rate, even a small amount turns into lakhs over time. If you need money, first consider a gold loan, FD loan or other options. Touch PF only when there is no other way left. Remember, your PF is your safest retirement fund.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.