PF(provident Fund) is an essential part of everybody's assets. It starts building slowly from a small bunch of one's salary and gives quite an attractive benefit. I tried to demonstrate that due to Tax deductions, PF becomes one of the best option to excercise. The goal below is to keep equal amounts in hand and invest the rest amount in PF and other places. PF usually out-beats its counterparts in short run as well as in long run.
Lets say as per your CTC,| Per month income = (A) = 1,00,000. |
| Basic is 55% of A = (B) = 55,000. |
| PF as 12% of B = (C) = 6600. |
| Total PF in the year by Employer = 12 * B = 79200. |
| Total PF in the year by Employee = 12 * B = 79200. |
| So total tax in the year will be on 12,00,000 - 79,200 - 1,00,000 or 10,20,800 after investing 100000. 79,200 by the employer is already non-taxable and does not included in your income. |
| Total tax in the year = 14,000 + 40,000 + 1,56,240 + 624 = 2,10,864 |
| Money in hand = 12,00,000 - 79,200*2 - 2,10,864 = 8,30,736. |
| Money in hand per month = 69,228 |
| Money saved in PF = 1,58,400 |
| Interest on this = 13,464 |
| Total saved in PF = 1,58,400 + 13,464 = 1,71,864. |
| Total money in the year = 1,71,864 + 8,30,736 = 10,02,600. |
| If there is no PF then Total tax in the year will be on (12,00,000 - 1,00,000) after 1,00,000 investment |
| Total tax in the year = 14,000 + 40,000 + 1,80,000 + 3000 = 2,37,000 |
| Money in hand = 12,00,000 - 2,37,000 = 9,63,000 |
| Money in hand per month now = 80,250 |
| Money invested else where = 9,63,000 - 8,30,736 = 1,32,264 to make inhand amount same in both cases. |
| Money in hand per month now = 69,228 |
| Interest received by you on invested amount(10% assume) = 13,226 |
| Total invested growth = 1,32,264 + 13,226 = 1,45,490. |
| Total money in the year = 1,45,490 + 8,30,736 = 9,76,226. |
| Total saving in the year when taken PF option = 10,02,600 - 9,76,226 = 26,374 |
| Total effective percent of growth on PF with respect to other investment = 100*26,374/1,45,490 = 18.13% |
That means you are getting a growth of more than 18% to that of an investment done in other places than PF. Of course, if employer PF is not from the employee salary then PF is highly beneficial. Anyhow, in either case PF beats the other alternatives.