Latest EPF Withdrawal Rules 2016 Which You Should Know. In the previous articles, we have given How to Claim EPF without Employer’s Sign and 4 Easy ways to Transfer and Withdrawal EPF. Now we are providing the latest EPF withdrawal rules which are applicable from 10th Feb 2016. The Ministry of Labour and Employment, Government of India, has recently made a few amendments in the Employees’ Provident Fund Scheme, 1952 (PF Scheme). These guidelines are mainly related to ‘early withdrawals‘ from Provident Fund & provisions related to PF withdrawals. These latest EPF withdrawal rules are effective from 10th February 2016.
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 organization. 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.
Amendments are related to;
- Full EPF balance cannot be withdrawn before attaining the Retirement Age.
- Continuity of EPF membership.
- Increase in Age limit to withdraw 90% of PF balance.
- Partial withdrawal of EPF amount on Resignation.
- Increase of retirement age.
An EPF corpus has four parts.
- Employee Contribution
- Employer Contribution
- Interest on employee contribution
- Interest on employer contribution
Employee Contribution: It is the 12% of basic salary plus DA. The total employee contribution is used for Employee Provident Fund
Employer Contribution: It is also 12% of the basic salary plus DA. But 8.33% is used for employee pension scheme. The pension contribution can’t go beyond Rs 1250/month. The remaining amount is used for employee provident fund.
Existing EPF Withdrawal Rules
According to EPF Withdrawal rules, you can get back your EPF money only on three situations.
- After the retirement at the age of 58 or after.
- Unemployment for more than two months.
- Death before the retirement.
The EPF withdrawal amount is tax-free if you get it after the retirement or continuous service of 5 years. The EPF withdrawal before completing the 5 years of continuous service makes the EPF contribution and earning both taxable.
EPF Withdrawal Latest 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 new pf rules. The list of purposes and quantum of contribution which can be withdrawn are listed below:
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).
2) 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.
3) 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.
4) 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.
5) 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
6) Retirement Age
- Existing rule : The retirement age is considered as 55 years.
- New Rule : The age of retirement has now been increased from 55 to 58 years.
7) Increase in Age Limit For 90% EPF withdrawal
An individual must be 54 years old to withdraw up to 90% of the corpus (employee share + employer share) of his or her provident fund account.
8) EPF membership Continuity
Old Rule –
As per earlier rule one could withdraw full EPF amount after resigning from the job, hence his/her EPF account deemed to be closed on withdrawal of EPF amount.
New Rule –
As full EPF withdrawal is not allowed now, an individual member can continue with same UAN Number after withdrawal of his or her own contribution. EPF membership will continue until retirement age of the member.
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.
Note: The Budget 2016-17 proposal of levying income tax on 60% of EPF balance has been withdrawn by the government. So, no tax will be levied on PF withdrawals at the time of retirement. The other Budget proposal to make 40 per cent of the total withdrawal from the National Pension Scheme (NPS) will however remain unchanged. (Latest news : 08-March-2016).
Positive of New EPF withdrawal rules
- New EPF withdrawal rule will now allow withdrawing full EPF amount till retirement age. This will help members to build funds for their retirement, especially to people who never bother about retirement planning.
- A long-term availability of funds to the PF authorities might result in better returns for the few members, who does not know how to invest their money.
Negative of New pf withdrawal process rules
- You will not able to use full EPF amount for doing business. Although, you may able to earn more money in business compare to EPF interest.
- Your EPF money will earn fixed interest only. This will impact your retirement corpus amount significantly. A smart investor may like to invest this money in a Mutual Fund for earning better returns.
You will not able to use this money during a hard time after leaving your job.
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