EPF and EPFO
The Employee Provident Fund (EPF), administered by EPFO (Employee Provident Fund Organization, a statutory body under the labor ministry, ministry of finance), helps employees save a small fraction of their remuneration every month and thereby, build a corpus which is tax exempt for use in the fag end of their lives or retirement. Albeit, EPFO is a long-term savings tool, primarily aimed for a stress-free retirement, salaried employees may choose to withdraw their money in their EPF account to cater to different financial requirements or at the time of any major life events such as weddings, home renovation/alteration and medical treatment among others. All organisations which have employed more than 20 employees should compulsorily register with EPFO. To make the optimum use of the EPF account, salaried employees must be aware of what a provident fund account entails and how it is operated.
Employee Provident Fund (EPF)
It is important to note that 12% of the basic pay of a salaried employee (in addition to dearness allowance and cash value of food allowances, if any) is deducted from his or her remuneration on a monthly basis as contribution towards an EPF account. However, from the employer’s contribution, 8.33% is deposited in the Employee Pension Scheme (EPS) while only 3.67% is deposited in the EPF account. The current rate of interest (for financial year 2015-16) for an EPF account is 8.7% p.a. The rate of interest is subject to change every year, as announced every year by EPFO.
EPF Account Withdrawal: Procedure
If salaried persons wish to withdraw their EPF accounts, they have to submit form 19 to their ex-employers, who in turn, have to sign and attest it. To complete the withdrawal procedure, members have to submit various other documents, namely, resignation letter and a cancelled cheque in addition to form 19 to the EPFO.
EPF Withdrawal Rules
It is important to note that withdrawal of the EPF account by a salaried employee between switching jobs his or her jobs is illegal. As per PF withdrawal rules, a salaried employee can withdraw a provident fund account on two counts; first, if he or she has no job and second, if two months have elapsed since his or her last employment (not attached to any organization or unemployed for 2 months). Nevertheless, there are cases wherein employees - assuming a cumbersome claims process- may withdraw their EPF account at the time of leaving an organisation. However, apart from the legal angle, experts do not recommend following the aforementioned practice from the perspective of financial management as well in that a salaried employee cannot avail of several benefits of maintaining a provident fund account including tax-free interest, annual compounding and compulsory long-term savings among others. Experts, therefore,, advice employees to instead transfer the EPF balance in their previous employer’s account into the account of their current employer. However, the government of India’s Unique Account Number or UAN simplifies the procedure (management and transfer) given that it is allotted to all salaried employees and will not change throughout their careers. Salaried employees will, therefore, not be provided a new account number when they hop jobs or companies.
EPF Withdrawal Rules: Purposes
Salaried employees may withdraw money from their EPF accounts for various purposes, subject to certain conditions. Individuals have to furnish several documents in addition to meeting the eligibility criteria as per epf withdrawal rules. The list of purposes and quantum of contribution which can be withdrawn are listed below:
- Marriage A salaried person can withdraw for self, siblings and children. He or she should, however, have completed a minimum of seven years of service to withdraw 50% of contribution (thrice in a career).
- Medical treatment A salaried person can withdraw up to either six times of his or her monthly salary or total corpus towards medical treatment of self, parents, spouse and children.
- Construction/Purchase of plot If a salaried person wishes to withdraw from an EPF account for the purpose of either construction or purchase of a plot, the property must be registered in his or her name, spouse or be jointly held. A minimum of five years of service is required to withdraw an amount which is 24 times the salary of the account holder. For construction of a house, 36 times of the salary of an account holder can be withdrawn. It is important to note that withdrawal for said purpose can be done only once during the service of an account holder.
- Home Loan Repayment If a salaried person wishes to withdraw from an EPF account for the purpose of home loan repayment, the house should be registered in his or her name, spouse or be held jointly. A minimum of 10 years of service is required to withdraw up to 36 times of the salary of an account holder.
- House renovation/alteration If a salaried person wishes to withdraw from an EPF account for the purpose of house renovation or alteration, the house should be registered in his or her name, spouse or be held jointly. A minimum of five years of service is required to withdraw about 12 times of the monthly remuneration of an account holder.
- Retirement An individual must be 54 years old to withdraw up to 90% of the corpus of his or her provident fund account.
- Miscellaneous Individuals can choose to withdraw from their EPF account for various other reasons such as premature retirement as a result of any physical or mental disability, migrating abroad for the sake of better employment or settling down in a foreign country.
EPF Withdrawal Amount: Taxation
If a salaried employee opts for withdrawal after continuous service of five years or above, there will be no TDS deduction on the amount. It is important to note that if withdrawal is made before the completion of five years of continuous service, the amount withdrawn will be taxable. According to new EPF rules announced by the finance minister in budget for financial year 2015-16, EPF withdrawal (taxable) will attract TDS deduction at the rate of 10% (in cases of registered PAN) or up to a maximum of 30% (in cases of unregistered PAN). However, no TDS will be deducted if the withdrawal amount is under Rs.30,000. It is important to note that an individual can submit form 15G during the time of withdrawal if his or her income is less than the basic exemption limit even after the addition of the provident fund withdrawal amount. If a subscriber does not submit his or her PAN, TDS will be deducted at 34% on his or her withdrawn amount. If salaried persons want to avoid TDS, they can submit form no. 15H (senior citizens) or 15G for amount up to Rs.3 lakh and Rs.2.5 lakh respectively (both the said forms are declaration forms which can be used by employees whose income is less than the taxable amount). It is important to note that there will be no TDS deduction in cases of transfer of a provident fund account and termination of an employment contract as a result of failing health (employee), cessation/discontinuation of a business venture (employer) or any other cause which may not be in the domain of an employee.
EPF Account Withdrawals: Grievances
The Consumer Protection Act encompasses a detailed procedure to resolve various grievances of EPF account holders. An individual or member can log on to the official website of EPFO at www.epfigms.gov.in and click the tab ‘register grievance’. A member can register all kinds of grievances vis-a-vis withdrawal of EPF account, insurance benefit (payment), scheme certificate, transfer of the account, cheque misplacement and PF balance issuance among others.
EPF Online Direct Withdrawal Facility
All cumbersome paperwork related to withdrawal of EPF account may be a thing of the past. EPFO aims to launch an online facility for PF withdrawal in 2016. EPFO, which currently has over five crore members, is planning to settle PF claims in three hours after receipt of a withdrawal application (online application will be transferred to the bank accounts of subscribers). To the end, EPFO has become UIDAI’s registrar. While around 92 lakh subscribers provided their Aadhaar numbers, EPFO verified around 64 lakh numbers so far (as of October 2015) for linking it with UANs.
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- EPF Claim Status
- EPF Interest Rate
- How to Transfer PF Amount
- Provident Fund Rules
- SBI EPF
- Gratuity Calculator
- EPF Account Withdrawal Fraud
- EPF Money after Resignation
- EPF Life Insurance
- 7 Ways to Check PF Account Balance
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- How to Access UAN Account after Changing the Mobile Number
- How to Change EPF Nomination Online
- Claiming PF from Inactive EPF Accounts
- EPF vs EPS
- EPF Claim after the Death of a Subscriber
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- GPF Amount Withdrawals
- Claim 100% EPF at 60 Years
- Breakup of EPF Contribution
- EPF Contribution in Basic Salary
- Centre Cracks Down on EPF
- Employee Deposit Linked Insurance Scheme
- EPF e-Passbook
- Employee Pension Scheme
- File an RTI for EPF Withdraw or Transfer
News about PF Withdrawal Rules and Regulation
Worker’s Union Appreciates EPFO’s Decision About PF on Retirement Day
EPFO has instructed employers to pay the Provident Fund contribution amount one month in advance of an employee’s retirement date. Several worker’s union has appreciated EPFO for this decision as this will make sure that the retiree receives the pension and Provident Fund amount on or before the date of his/her retirement. Once The Employee’s Provident Fund Organisation(EPFO) announced their decision, workers union called this to be their “Diwali Gift”. Central Provident Fund Commissioner, V P Joy has informed and issued all the offices about the instructions.
21st November 2016
Restrictions on EPF withdrawals removed
Following a series of protests and agitations against the updated EPF withdrawal norms, the government had no choice but to give in to the demands, removing the restrictions imposed on withdrawals. The government which had modified withdrawal norms in the budget had to roll back the changes after violent protests were witnessed in Bengaluru. Individuals can now withdraw the complete amount in their EPF account in cases where they have been unemployed for two months and over. Additionally, the government also revised the retirement age, bringing it back to 58 years.
28th April 2015