Tax-free, risk-free, and effort-free. But CA says many employees make mistakes that cost lakhs in lost savings

You may think you are investing smart, but you are actually losing out on earning crores and a life of early retirement. Taking to X, chartered accountant Nitin Kaushik explained that while stocks and mutual funds may promise a higher return, employee provident funds (EPFs) are an underrated earning tool that guarantees steady earnings but are overlooked by most.

Understanding the Basics of EPF

The Employees’ Provident Fund, often dismissed as a routine salary deduction, is actually a government-backed savings tool that quietly builds long-term wealth, argued the CA. Under this scheme, 12% of your basic monthly salary is automatically contributed towards your EPF. What most people don’t fully appreciate is that your employer is also legally required to contribute an equivalent amount, essentially giving you an additional 12% in free savings every month.

💥 How Indians Are Quietly Losing Crores (While Thinking They’re “Investing Smart”)

Most Indians are unknowingly saying goodbye to crores meant for retirement.
Not because they picked the wrong mutual fund.
But because they ignored the one investment already working silently for… pic.twitter.com/zvgsDuEVKG

— CA Nitin Kaushik (@Finance_Bareek) July 18, 2025

For the financial year 2024–25, EPF contributions earn an annual interest of 8.15%. These returns are not only guaranteed by the government but also entirely exempt from income tax. With no requirement for personal effort, trading knowledge, or app-based management, EPF emerges as one of the most secure ways to accumulate retirement funds.

The Long-Term Value: Simple Calculations with Major Impact

Kaushik explained that an individual with a basic monthly salary of Rs 40,000 contributes Rs 4,800 to EPF. Their employer adds another Rs 4,800, making the total monthly contribution Rs 9,600. At the current interest rate of 8.15%, this individual could accumulate Rs 1.02 crore in 25 years—without including future salary increases.

This significant sum is built passively, without the stress of tracking markets or fearing losses. Unlike investments requiring active management, EPF simply compounds in the background, steadily building wealth while you go about your daily life.

Why EPF Outperforms Many Investment Alternatives

There are several reasons why EPF outshines traditional savings and even many stock market portfolios, stated Kaushik:

• The interest earned is tax-free
• It typically offers higher returns than fixed deposits
• It is not exposed to stock market volatility
• It builds a habit of disciplined saving
• The employer’s contribution accelerates compounding
• It eliminates emotional investment decisions such as panic-selling or timing the market
• These factors combined make EPF an incredibly strong foundation for long-term wealth creation.

Common Mistakes That Cost You Dearly

Despite the numerous advantages, many individuals fail to fully leverage the EPF system. Some of the most frequent and financially damaging missteps include

• Withdrawing EPF funds prematurely
• Neglecting dormant or past EPF accounts
• Not activating their Universal Account Number (UAN)
• Failing to update Know Your Customer (KYC) details
• Ignoring EPF balances after switching jobs

These mistakes often lead to lost savings that could have significantly boosted one’s retirement fund.

When Is EPF Withdrawal Allowed?

While EPF is designed as a retirement fund, there are specific scenarios where early withdrawals are permitted. These include:

• Funding a marriage (self or family)
• Paying for medical treatment
• Buying or constructing a house
• Pursuing education
• Facing unemployment for more than two months
• Permanent relocation to another country

Even with these allowances, early withdrawal should be a carefully considered decision given its long-term impact on retirement savings.

Who Should Invest in EPF?

EPF is mandatory for salaried individuals whose basic income is ₹15,000 or less and who work in organisations with 20 or more employees. However, even high-income earners can voluntarily participate by informing their human resources department to activate or maintain their UAN. Choosing to stay invested in EPF can help high earners diversify their portfolio with a low-risk, stable growth component.

The Debate: Stocks vs. EPF

While stock investments may offer higher returns for those who are financially savvy, they come with considerable risks and require active monitoring, said the CA. For the average person unfamiliar with market fluctuations, EPF offers a reliable, low-stress path to wealth creation. Choosing stocks without expertise is akin to saying you prefer homemade meals but eating out daily—it sounds appealing but doesn't reflect consistent long-term discipline.

EPF’s Real Strength Lies in Stability

Ultimately, EPF is not about exciting returns or beating the market. It’s about providing

• Reliable, tax-free growth
• A steady stream of contributions from your employer
• Financial security without the stress of managing investments
• A disciplined savings routine
• Long-term peace of mind

In an investment landscape full of noise and volatility, EPF stands out as a quiet, consistent performer — and a powerful tool for anyone aiming for a secure and early retirement.