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The amount in PF account can be withdrawn either completely or partially subject to certain terms and conditions.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 In these conditions only, the amount can be withdrawn completely.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 The remaining 25 per cent of the EPF balance can be withdrawn if you remain unemployed for over two months.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.