Designer Credits: Sheetal Patil
Rules regarding withdrawals from the Employee Provident Fund (EPF), which have always placed restrictions on the amount that could be withdrawn, have now been eased. Yesterday, the Labour Ministry of India removed restrictions on the withdrawals of the contributions made to your EPF.
You could withdraw your EPF only at retirement or when changing jobs or under ‘special’ circumstances. Even though these special circumstances included housing and medical treatment, there were restrictions on the amount that could be withdrawn. For instance, for your children’s education or marriage you could withdraw only 50% of the corpus and you need to have completed 7 years of continuous employment.
According to news reports, withdrawals will now be allowed for the purpose of housing, medical expenses for self and other family members and also for the education of your children. You could even withdraw from your EPF to meet the wedding expenses of your children.
Here’s the whole list:
- Housing needs of the EPF account holder
- Medical expenses for self or a family member suffering from
- Heart disease
- Marriage of the account holder’s children
- Professional education of the account holder’s children (engineering, medical and dental)
It is said that this relaxation in the rules will also apply to those who belong to a company coming under or belonging to the Central and State Government. But, they should be a part of the Contributory Provident Fund or the Old Age Pension Scheme. It is expected that the norms will come into effect from 1st August, 2016. The best part is that the Government will pay the full accumulation in your EPF account including the interest that would be due up to the date of payment of the amount. Two months ago, the Labour Ministry had mentioned that one cannot withdraw their EPF balance after they turn 54 years old and would have to wait till they are 58 years old.
Some More Good News
Earlier in April, the Employee Provident Fund Organization (EPFO) had said that you cannot withdraw 100% of the balance in your EPF account even if you remain unemployed for more than two months. This was supposed to come into effect from 1st May 2016. However, this has now been postponed to August. It is expected that these norms will come into effect from 1st August 2016 along with the above withdrawal norms. Also, note that this rule doesn’t apply to female account holders who are resigning for the purpose of their marriage, pregnancy or child birth.
You should also be aware that the EPFO has decided to provide interest on inoperative EPF accounts. This has been in effect from 1st April 2016. It is expected that this will apply to the over Rs.32,000 crore worth of deposits in inoperative accounts. These are accounts where there have been no contributions for more than 36 months.
Tax will be deducted at source (TDS) if EPF is withdrawn within 5 years. However, TDS won’t be applicable if the PF amount is less than Rs.50,000. The employer contribution will be taxed as a part of your salary income while the employee contribution will be taxed as income from other sources. Remember that the earlier deductions you claimed under Section 80C will be reversed.
Tip: Consider an Education Loan for your kids instead of withdrawing from your EPF which should be part of your retirement kitty. This way, your kids can also help repay the loan as soon as they are employed.
I moved overseas a few years ago and would like to withdraw the PF balance. What is the easiest way to do this without requesting previous employers. Is there a professional who can help me with this? Thanks for your post.
The best way for you to withdraw your PF would be by contacting your ex-employers. You could write to the EPF office and send the forms on your own. However, that could be a long process and there will be no one to follow up for you.
I am terminated after completed my 10 month job in a bank so it is possible could I withdraw my EPF and if yes then what is the procedure.
EPF withdrawals are permitted only if you are unemployed for a minimum period of 2 months.
I’m currently on Notice Period and would be joining another firm after completion of my notice period and My total experience is 7 years. Can I apply for PF withdrawal while switching jobs
Hi Santhosh, If you are unemployed for more than 2 months, you can withdraw from your EPF. EPF withdrawals are allowed for the purpose of housing, medical expenses for self and other family members, and also for the education of your children. You could even withdraw from your EPF to meet the wedding expenses of your children. If you’re withdrawing for any of the above reasons, you can apply. Cheers, Team BankBazaar