Learn all about EPF Withdrawal norms. Check the latest Employee Provident Fund withdrawal rules w.e.f from 10/02/2016. Read more about EPF Withdrawal Rules.
What is EPF?
EPF is a retirement benefit related only to salaried employees. Employee Provident Fund is a fund to which both the employee and employer contribute 12% of the former’s remuneration amount each month. The government pre-sets this percentage. EPFO-Employee Provident Fund Organization regulates the EPF (Employee Provident Fund). EPFO is a legal body under the labor ministry which helps employees save a small fraction of their basic salary amount every month and thereby, build a corpus which is tax exempt for use in the fag end of their retirement.
EPFO registration is mandatory for all companies which have employed more than 20 employees. The salaried employees must be aware of provided fund account to make the optimum use of it. It is important to note that 12% of the basic pay of an employee is deducted from salary on a monthly basis as the contribution towards an EPF account. However, from the employer’s contribution, 8.33% is deposited in the EPS (Employee Pension Scheme) while only 3.67% shall be filed in the EPF account. The current rate of interest (for the 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.
On a basic salary of Rs. 15,000/-, 12% (Rs 1800/-) contribution by the employer would be contributed in the following manner Rs. 550.5/-(3.67%) would go towards the Employee Provident Fund & Rs. 1249.5/-(8.33%) would go towards the Employee Pension Scheme.
Latest EPF Withdrawal Rules
The Ministry of Labour and Employment of India has recently made a few amendments in the Employees’ Provident Fund Scheme, 1952. These guidelines are mainly related to ‘early withdrawals‘ from Provident Fund and provisions related to EPF withdrawals. These latest Employee Provident Fund withdrawal rules are effective from 10th February 2016.
Let us take a look at EPF Withdrawal Amendments listed below.
- Full EPF balance cannot be withdrawn before attaining the Retirement Age 58 years.
- Continuity of EPF membership – Employee Provident Fund membership does not end with leaving the job.
- Increase in Age limit to withdraw 90% of Provident Fund balance once employee reached the age of 57 years.
- Partial withdrawal of EPF amounts on Resignation.
- An increase of retirement age from 55 years to 58 years.
Let us take a look at the detailed explanation for the latest EPF Withdrawal rules.
Full EPF balance cannot be withdrawal
The EPF members cannot withdraw full Provident Fund amount before attaining the age of retirement. The maximum withdrawal on cessation of employment cannot exceed an amount aggregating employee’s contribution and interest accrued thereon. You can withdraw your contributions + interest portion only. The employer’s portion can be withdrawn after attaining the retirement age (58 years).
Continuity of your EPF membership
The salaried employee can only withdraw his/her share on resigning from the job. An employee cannot withdraw full EPF amount before attaining the retirement age. Hence, the employee will still be the member of EPF even if you cease to be an employee of an EPF covered establishment. I believe that concept of ‘In-operative EPF a/c may cease to exist.
The retirement age of the salaried employee has been increased from 55 to 58 years.
EPF Withdrawal provisions
As mentioned above, the age of retirement has been increased from 55 to 58 years and the option of full EPF withdrawal on resignation will not be allowed. The salaried individual can withdraw employee contributions + interest portion only.
90% of EPF balance
An employee would now be able to avail this option only on attaining the age of 57 years. The age has now been increased from the 54 years to 57 years.
TDS on EPF Withdrawal Rules 2016
Recently a new bill has been issued by the Income Tax India which makes it compulsory to deduct tax (if it qualifies) on EPF amount. Most of the employees while switching over to another employer withdraw the balance amount in their of account. It is important to note that withdrawal of the EPF account by a salaried employee between switching jobs his or her jobs is illegal. The new rules brought by the income tax is to change the attitude of the working class. Instead of withdrawing the PF amount they can transfer their money to new one.
Normally Employee Provident Fund has the following features from the taxation perspective.
- Employer contribution to Provident Fund subject to a maximum 12% of salary plus dearness allowance is exempted from tax.
- And the employees contribution towards Provident Fund is deductible under section 80C.
- Interest on employers and staff contribution is exempted from tax but subject to 9.5%.
- Another major condition about EPF is the lock-in period of minimum service five years. If anyone withdraws it before the lock-in period of service, then the employee would be liable to pay to get canceled the tax benefits availed till the day.
EPF withdrawal Purposes
A Salaried individual may withdraw an amount from their EPF accounts for various purposes, subject to certain conditions. Employees have to furnish several documents in addition to meeting the eligibility criteria as per EPF withdrawal rules. Let us take a look at the list of purposes which can be withdrawn below.
- Marriage: A salaried employee can withdraw for the wedding purpose of self, siblings and children. However, the employee should have completed a minimum of seven years of service to withdraw 50% of contribution (thrice in a career).
- Construction or Purchase of plot: If salaried individual wishes to withdraw an amount from an EPF account for the purpose of either acquisition of a plot or construction, the following condition must be fulfilled. The property must be registered under employee, 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 the 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.
- Medical treatment: A salaried individual can withdraw up to either six times of their monthly salary or total corpus towards medical treatment expenses for self, parents, spouse, and children.
- Home Loan Repayment: If the employee wishes to withdraw from an Employee Provident Fund account for the purpose of home loan repayment, the house should be registered under employee name, or spouse or be held jointly. The employee should have a minimum of 10 years of service to withdraw up to 36 times of the salary of an account holder.
- Retirement: A salaried individual must be 54 years old to withdraw up to 90% of the corpus of employee provident fund account.
- House renovation or Alteration: If the salaried individual wishes to withdraw from an EPF account for house renovation or alteration, the house should be registered employee name, spouse or be held jointly. An employee must attain a minimum of five years of service is required to withdraw about 12 times of the monthly remuneration of an account holder.
- Miscellaneous: Individuals can choose to withdraw from their EPF account for various other reasons such as premature retirement as a result of migrating abroad for the sake of better employment or due to any physical or mental disability, or settling down in a foreign country.
For more information regarding EPFO login, EPFO online claim status, EPF claim status, kindly visit EPFO portal.