If you are a salaried individual, you already know how significant the Employee Provident Fund (EPF) is for your saving needs. This is why, it is one of the most popular investment schemes in the country. Very recently, the structure of the EPF has undergone some revisions and this has caused some changes in the withdrawals as well. In this article, we will talk about the 7 most important EPF withdrawal rules but before that, let us briefly understand what an EPF is and what its benefits are.
What is EPF?
The EPF, regulated by the Employees’ Provident Fund Organisation (EPFO), came into being with an intent to build a retirement corpus for employees throughout the country. The employee and the employer together make monthly contributions towards the fund for which an interest of 8.65% is offered currently. All organisations that employ more than 20 people must mandatory contribute a fixed amount (12% of their fixed pay) towards the EPF while also deducting the same from the employee’s salary.
Subscribers of EPF can make withdrawals from EPF under certain conditions which have been explained in one of the below sections.
Benefits Offered by EPF
Perhaps one of the greatest benefits offered by EPF is that it helps salaried individuals save up for their retirement. For employees working in the private sector, the EPF is a great boon as they are not entitled to any pension schemes offered by the government to their employees. The other benefits that EPF offers have been summarized below:
- The employee’s contribution towards EPF is exempt from tax under Section 80C of the Income Tax Act. Not just that, the interest earned on it also qualifies for income tax exemption. Another tax benefit that EPF offers is that the withdrawals will not be taxed if the employee has been working continuously for 5 years.
- 8.33% of the share of the employer is directed towards the Employees’ Pension Scheme (EPS). As per the EPFO rule, subscribers will be entitled to a lifelong pension if they have contributory membership of 10 years. This rule is in accordance with the Employees’ Pension Scheme, 1995.
- EPF allows premature withdrawals when the subscribers require funds for emergencies such as medical treatments, unemployment, home loan repayment, etc.
- The EPFO also provides an insurance cover under the Employees Deposit Linked Insurance (EDLI) Scheme to subscribers of EPF. Under the scheme, registered nominees will be entitled to receive a lump-sum amount (up to Rs.6 lakh) if the insured individual dies during the service period.
7 EPF Withdrawal Rules You Should Know About
As stated above, subscribers can withdraw their EPF if they are unemployed for more than 2 months, need funds to meet certain exigencies, or when they retire from unemployment. If you have decided to withdraw your EPF, here are 7 withdrawal rules you should know about:
- You can withdraw the EPF balance if you have been unemployed for at least one month. In such cases, you can only withdraw 75% of the accumulated EPF corpus. Even after the withdrawal, you will still be a part of the EPF and can enjoy pension benefits. However, if you are unemployed for 2 months and above, a 100% withdrawal can be done. Women EPF subscribers who have plans of getting married and hence, have resigned, need not wait for 2 months for withdrawing 100% of the corpus.
- If a contribution has been made by you towards your provident fund for over 5 years, the amount that you receive upon withdrawal will be exempted from income tax. However, if there is a gap in the contribution, the entire EPF amount will become taxable for that financial year.
- You do not need approval from your employer to withdraw the EPF corpus. You can withdraw your EPF directly from the regulatory body EPFO but for this, your Aadhar and Universal Account Number (UAN) should be linked. You can check the status of withdrawal online.
- If you withdraw the EPF corpus prematurely, the tax will be deducted at source but only if the entire amount is more than Rs.50,000. In such cases, and in cases where the income for that year is lesser than the taxable limit, you can submit Form 15H (if you are a senior citizen) or Form 15G (if you have no taxable income) to avoid Tax Deducted at Source (TDS). The usual TDS charge for withdrawals before 5 years of continuous employment is 10%.
- To make a 100% EPF withdrawal before retirement, you must declare unemployment for more than 2 months. If you are unemployed for 1 month, you can withdraw 75% of the EPF and get the remaining 25% transferred to a new EPF account when you join a new employer.
- EPFO allows partial withdrawals under certain conditions such as marriage, home loan repayment, house renovation, education, and purchase of land or house. You must fulfil certain criteria to be eligible for such withdrawals and the amount will vary with the conditions.
- If you change jobs and the EPF is transferred to your current employer, the period of employment with the new employer will be considered as continuous employment.
You can withdraw your EPF corpus either by submitting an online application or by submitting the physical withdrawal application form. And also Bankbazaar provides the all the information about PF withdrawal, PF withdrawal rules and how to check your EPF balance online.