The Employees Provident Fund (EPF) is a mandatory saving and retirement scheme designed for salaried employees.
The present rules specify that an employee contributes 12% of his basic salary per month to this fund and the employer is obligated to contribute the same amount every month.
The funds in the Provident Fund (PF) account gains interest on an annual basis as per the rate of interest decided and declared by the Government.
Let us now understand how you can utilise the funds lying in your PF account to fund any eventualities in your life.
PF withdrawal rules:
The amount in PF account can be withdrawn either completely or partially subject to certain terms and conditions.
To withdraw the said amount completely, you need to be either retired or unemployed for a period of more than two months. In these conditions only, the amount can be withdrawn completely.
You will be eligible to partially withdraw provident fund balance in case of marriages of children, their higher education, repayment of home loans, emergency medical conditions, renovation of home, purchase or construction of a house, purchase of land and at a certain age before retirement.
PF partial withdrawal rules:
Unemployment: You are allowed to withdraw up to 75 per cent of the total EPF balance on being unemployed for one month after quitting a job. The remaining 25 per cent of the EPF balance can be withdrawn if you remain unemployed for over two months.
Retirement: After attaining the age of 54 years or within one year of retirement/superannuation (whichever is earlier), you will be eligible to withdraw up to 90 per cent of the provident fund balance.
Marriage/education of children: In case of monetary requirement for the purpose of marriages or post matriculation education of children, you can withdraw up to 50 per cent of the employees share with interest-only subject to the condition of having completed 7 years.
Handicapped: In case of handicapped people, partial withdrawal is allowed from the EPF balance for purchasing equipment for minimising hardship on account of handicap. Under this condition, a person can withdraw six month’s basic wages and dearness allowance (DA) or employee share with interest or cost of equipment, whichever is the least.
Illness: A person can apply for partial withdrawal from the EPF balance for the treatment of illness in certain cases. For self-usage or for the treatment of family members, You will be entitled to withdraw 6 month’s basic wages and DA or employees share with interest, whichever is the least.
Loan repayment: For the repayment of home loan EMIs, you are eligible to withdraw 36 month’s basic wages and DA or total of employee and employer share with interest or total outstanding principal and interest, whichever is least, only after completing the 10-years.
Purchase of land/house: You will be allowed premature partial withdrawal from the EPF account for purchase of house/flat/construction of house including acquisition of site only after completion of five years. You will be allowed to withdraw the total of employee and employer share with interest or total cost or 24 month’s basic wages and DA (for purchase of site)/36 month’s basic wages and DA (for purchase of house/flat/construction), whichever is lower.
House renovation: Interestingly, EPFO also has a provision of partial premature withdrawal for addition/alteration/improvement in the house owned by member/spouse/jointly with a spouse. Under this condition, you can withdraw 12 month’s basic wages and DA or employee share with interest or cost, whichever is the least. This facility can be availed two times, once after five years of completion of the house and, secondly after 10 years from withdrawing the balance for the first time.
Online PF Withdrawal Process:
Step 1: Activate the Universal Account Number (UAN) and ensure that it is linked with a registered mobile number. Make sure that it is liked with your KYC, i.e., bank details, Aadhaar and IFSC code.
Step 2: Go to the UAN portal and log in with your UAN and password. Enter the captcha and proceed with signing in.
Step 3: Go to the ‘Online Services’ tab on the top, drop-down menu and click on the ‘Claim (Form-31, 19 & 10C)’ option.
Step 4: This will take you to a new page with all the member details, KYC details and so on. Fill out your bank account number and click on ‘Verify’. Then you need to fill in the reason for leaving the services of PF.
Step 5: A pop-up will appear named, ‘Certificate of Undertaking’. Click on ‘Yes’.
Step 6: Go to the drop-down menu again and select the ‘I Want To Apply For’ option and from there choose the ‘Only PF withdrawal (Form 19)’ option.
Step 7: Fill in the ‘Complete Address’ section and upload scanned copies of your Passbook or Cheque.
Step 8: Select the tick option on the disclaimer and click on the ‘Get Aadhaar OTP’ option. From there fill in the OTP received on your registered and linked mobile number. After this, submit the application.
Step 9: After submitting this form, follow the same steps and submit ‘Form 10C’ via the portal. The amount you requested should be deposited into your registered bank account within 15 to 20 days.
Taxability of PF Withdrawal Amount:
EPF withdrawal before five years of continuous service is taxable under the Income Tax Act.
In case of EPF withdrawal after 5 years of continuous service, the amount withdrawn (both principal and interest) is exempt from tax.
Situations when withdrawal before 5 years is tax free:
However, withdrawal made before 5 years will not be subject to tax in these situations:
Withdrawal made due to the ill health of the employee or discontinued business of the employer
Withdrawal made for any other reason beyond the control of the employer
Any advance availed under EPF Scheme.
TDS on PF Withdrawal Amount:
Where the amount withdrawn is more than or equal to INR 50,000,TDS will be applicable @ 10% on the withdrawn amount. If PAN is not provided TDS shall be deducted at highest slab rate of 30%
Where the amount withdrawn is less than INR 50,000 or the employer closing down the business, TDS will not be applicable.
You can submit Form 15G/Form15H if tax on your total income including EPF withdrawal is nil is below the taxable limit.
Special provision for Covid relief:
EPFO allows partial withdrawal from your PF account for meeting financial emergencies arising out of the Covid-19 crisis.
You can withdraw an amount equal to three months’ of basic and dearness allowance (DA) or 75% of the credit balance in the account, whichever is lower.
Even though I am not a finance person I did understand a few aspects due to your Ernest post and simplicity of writing. Thanks Sanjay.
PF has many benefits and it’s a very substantial saving amount for a salaried person. One must know its benefits to use it to the best.
Manisha Garg recently posted…The Beginning…
The title of your post had my full attention. What an interesting and profitable mode of saving! Thanks
To be honest I don’t have much idea about finance. Last year I have joined my family business and I am a beginner at learning about these things. And this post of yours is very helpful. I am sure I am going to learn more things about finance in your upcoming post
We have always believed in the benefits of PPF. It is one of the best and safest investments for tax saving that is also a good long-term investment. This is a very informative post about PPF, especially for those thinking of investment options.
Very informative post. I knew a bit about the PF and its benefits but did not know to this length. I do believe in securing and planning for the future and retirement and PF is a great way to do that.
I have been asking my family and friends to invest more in their PF as they make huge savings. It helps in emergencies and can act like a secure emergency fund. Thanks for this detailed post that helped me in understanding all the aspects.
Though EPF used to get deducted from my salary, I never bothered to know so much This is really informative. We all should be aware of the benefits in totality.
Ambica Gulati recently posted…A rainy day in Goa
This is quite an informative post on provident funds and their rules. I had a tough time with my EPF while changing my job long back. At that time, no one was there to tell me about these and it was a bit of a chaos. Thanks for sharing the PF withdrawal rules as well.
This was a very detailed and informative article for someone who is about to commence their professional life. Thank you for putting this down in the most comprehensive manner.
I have a dormant PF account and I had several questions on how I should proceed. Your article has provided some valuable insights Sanjay. It will definitely help me plan the next steps better.
This is very informative for even non finance background people. Love the detailing about EPF and PF and all the required aspects mentioned in detail
This was insightful Sanjay especially the new Covid rules on withdrawal and partial withdrawal. Glad you shared this with people like us who struggle to get the right information
I loved the detailed post on Provident Funds. It is definitely an important investment to make for securing one’s future.
This is good information. We need to think about emergency funds and it’s good to know that EPF has that provision.
Ambica Gulati recently posted…Why Buy A Gift From Exclusivelane.com
Thank you for this interesting and informative post. I must also congratulate you on the catchy title!
The applicable tax rules to the EPF withdrawal is nicely explained. I like the step-by-step guide for withdrawal. Thanks for sharing this informative article on Provident Fund.
Very useful post about PF. I am currently running my PPF account as I guess this is the best for everyone to save a little bit amount every month. Thanks for such an insightful post.
I did not know that we could withdraw the PF amounts for so many purposes. This is quite an informative post and definitely helped increase my knowledge about some of these basic stuffs.
This post is a blessing for those who are starting their journeys in the discussed area. It has so many necessary details and that too, explained so nicely. Thank you for sharing.
Priyal Sharma recently posted…Backpacking Through Eastern Himalayas Made Easy With This 15 day Travel Itinerary
Provident Fund was introduced under the Labour Laws of India, in 1952. The objective of this fund was to provide for all workmen including apprentices, daily rated workers, casual and part-time workers, workmen paid on piece rates or by the job and also for non-working members of the establishments. Accordingly all establishments employing 10 or more workmen are required to maintain provident fund accounts.
Nia Hayes – ShunCy recently posted…How to grow tea plants