EPFO allows PF withdrawal under certain circumstances. However, withdrawal before five years may attract tax. Also, recovery may be made on withdrawal citing wrong reasons. Understand EPFO withdrawal rules in detail
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EPFO withdrawal rules: Employee Provident Fund (EPF) is created to secure your retirement. However, sometimes sudden expenses arise which have to be met immediately. The Employees Provident Fund Organization (EPFO) allows subscribers to withdraw money from their Provident Fund (PF) account under certain circumstances.
However, financial experts believe that this option should be used as little as possible because it reduces the fund available on retirement.
What is EPF and how much do you contribute?
EPF is a mandatory savings scheme. This amount keeps getting deposited till retirement along with interest. The employee can withdraw it on retirement or in case of emergency.
Private sector employees who are included in EPF contribute 12 percent of their basic salary and dearness allowance (DA) every month. Employers also contribute the same amount. The interest rate for the financial year 2024-25 has been fixed at 8.25 percent. According to EPFO, there are mainly three types of withdrawals.
The first is final settlement. In this, the entire money comes out after retirement.
The second is partial withdrawal. Members can withdraw it for special needs.
The third is pension withdrawal benefit. This is for eligible members under the Employees’ Pension Scheme.
When can you withdraw PF money?
EPFO allows PF withdrawal in certain situations. However, if you have withdrawn PF citing wrong reasons, then EPFO can also recover it from you.
Unemployment: If you remain unemployed for more than a month, you can withdraw 75% of the balance. The entire amount can also be withdrawn if you remain unemployed for two months.
House and land needs: After three years of membership, you can withdraw up to 90% of your PF savings to buy or build a house. This amount can also be used to repay a home loan, with certain conditions.
Medical emergency: For yourself or dependents, you can withdraw up to six months of your basic salary and DA or your own contribution amount (including interest), whichever is less.
Marriage or education: After seven years of service, you can withdraw up to 50% of your contribution amount (including interest). This amount can be used for the child’s education beyond Class 10 or for marriage expenses.
Special cases: If the employer has closed the establishment or has delayed payment of salary for more than two months, the advance can be taken.
Things to keep in mind
Withdrawal before completing five years of service may be taxable. However, withdrawals less than Rs 50,000 are not subject to TDS.
There is no need to withdraw money while changing jobs. Balance can be easily transferred with an active Universal Account Number (UAN). The final settlement can be claimed at the age of 58, on retirement.
How to withdraw EPF?
Members can withdraw online using their UAN on the EPFO portal, or can also apply offline through a composite claim form (Aadhaar or non-Aadhaar).
While EPF withdrawals can come in handy in emergencies or big expenses, financial experts repeatedly advise against using them. Every withdrawal reduces your retirement savings, money that can grow over the long term through compound interest.
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