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 EPF 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 organisation.
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. Experts, therefore, advice employees to instead transfer the EPF balance in their previous employer’s account into the account of their current employer.
However, the government of India’s Unique Account Number or UAN simplifies the procedure (management and transfer) given that it is allotted to all salaried employees and will not change throughout their careers. Salaried employees will, therefore, not be provided a new account number when they hop jobs or companies.
New EPF Withdrawal Rules From 2019!! You Can’t Miss it
[Update: The government has rolled back the new EPF withdrawal rules. Thus, the existing EPF withdrawal rule continues. Because of this rollback, this post becomes invalid. However, if you are searching for the EPF withdrawal rules, I am giving a snapshot with this post ]
EPF withdrawal Rules: Procedure
If salaried persons wish to withdraw their EPF accounts, they have to submit form 19 to their ex-employers, who in turn, have to sign and attest it. To complete the withdrawal procedure, members have to submit various other documents, namely, resignation letter and a cancelled cheque in addition to form 19 to the EPFO.
EPF withdrawal 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 epf withdrawal rules. The list of purposes and quantum of contribution which can be withdrawn are listed below:
- Marriage 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).
- 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.
- 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.
- 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.
- 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.
Retirement An individual must be 54 years old to withdraw up to 90% of the corpus of his or her provident fund account.
- Miscellaneous 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.
EPF withdrawal Rules and Regulations
EPF Rules have undergone many changes in the last few years. The EPF rules have been altered regarding withdrawal procedure, contribution rules, inclusion and exclusion of employees to EPFO.
As per the latest changes of EPFO, India these are some most important EPF rules of EPFO that must be summarized:
Revision of minimum salary limits – Earlier to this amendment the minimum salary for mandatory contribution was INR 6500 per month but this limit has been revised to INR 15000. As of now employee having monthly salary of INR 15000 or less must have to contribute to EPFO.
Changes to pension amount – The pension amount now will be calculated as per the average of last 60 months salary rather than that of last 12 Months. The minimum monthly pension has been set to INR 1000 which will be given to the widow of the EPF member. The minimum monthly pension for the children and orphans of EPF member has also been revised and set to minimum INR 250 and INR 750 respectively.
Insurance Coverage – The amount of insurance coverage under EPF has also been revised from INR 1,56,000 to 3,00,000 per member.
Employer Contribution towards EPS –The contribution to the EPF has been revised and fixed to INR 1250 per month irrespective of the salary of the EPFO member. This alteration has been done because of the changes made in the minimum salary limit. This fixed amount is applicable only for the members having salary less than or equal to INR 15,000.
Change in threshold limit –A change has also been made to the threshold limit and even the firm or organisation having group size of 10 employees will be considered eligible for the EPF contribution. The previous threshold limit was of 20 employees.
Withdrawals- As per the EPFO withdrawals can be cited in the situation of Financing insurance policy, medical treatment, marriage, buying and building a new house and some other important situations as well.
Withdrawal can be made only via claiming forms like Form 19, Form 31, Form 13 etc. So you can know your PF claim status.
Employee Provident fund (EPF) Contribution Rules
As per EPF Rules the contribution to the EPF account of an employee is done by both the employee and the employer. The rule which is followed for the monthly contribution is as follow.
12 % of the basic pay (including D.A and other allowances) of an employee is deducted towards contribution to the EPF account of that employee. And the same amount that is 12% of Employee’s salary is also contributed by the employer on monthly basis. Out of those 12% from employer’s contribution, 8.33% is deposited to the employee Pension Scheme (EPS) whereas 3.67% is deposited to the EPF account of the employee.
The rate of interest given by the EPFO, India to the final accumulation on yearly basis is 8.6% for the financial year of 2016-17. The rate of interest is revised every year and is announced every year by the EPFO India.
EPF Interest Rate
NEW DELHI: Over 4 crore EPFO subscribers may get a lower interest at a rate of 8.6 per cent on their PF deposits for current financial year as Labour Ministry is expected to toe the Finance Ministry line to cut the rate.
Employees Provident Fund Organisation (EPFO) had provided 8.8 per cent rate of interest on EPF deposits for 2015-16 despite Finance Ministry’s ratification for 8.7 per cent.
“Finance Ministry has been nudging Labour Ministry to keep interest rate on EPF ..
EPF account withdrawal Procedure
If you want to withdraw your EPF amount then you have to submit Form 19 along with resignation letter and cancelled cheque to the EPFO office. The submitted Form 19 should be duly signed by the ex-employer and must also be attested by the gazetted officer or president of your Gram Panchayat. After your submission of form 19 with all the required formalities, your EPF amount withdrawal procedure is initiated.
- But it must be kept in mind that as per the new amendment in EPF Rules which is made effective from 10th Feb 2016 includes:
- Total EPF amount can’t be withdrawn before attaining the retirement age of the member.
- Even after changing the job the employee can continue with the same EPF Membership.
- Maximum of 90% of the total accumulation can be withdrawn before retirement.
- Members are entitled to partial withdrawal after resignation.
- Retirement age of Members has also been increased.
From the above information all EPFO employees know the EPF withdrawal Rules. Here we also shared EPF related information like how to check EPF balance, EPFO claim status, UAN activation status and many more.
EPF Membership Continues
Till now the EPF membership rules was linked with the employment. You become a member of EPF with the joining of a new job. Once you become jobless and withdraw your PF balance, the membership ceases to exist.
But, now your membership would continue up to the retirement age. The EPF membership has become independent of the job.
Indeed, the EPFO is trying hard to end the dependence of EPF membership on the employer or employment. The universal account number has already ended the exclusive hold of the employer. With UAN, you don’t need to submit KYC in every new job. If you link the Aadhaar with UAN, you do not require employers attestation for EPF withdrawal or transfer.
The EPF membership has to continue because of the new EPF withdrawal provision. Since you can’t withdraw the 100% of the PF balance, the membership is bound to continue. However, this rule is going to clash with the inoperative account rules. I will discuss it later.
Early retirement would not make you eligible for full EPF withdrawal rules Early retirement would be difficult You would be able to renew your PF membership anytime before the retirement.
|Subject||Old Rule||New Rule||Impact|
|Retirement Age||The retirement age should be at least 55 years for Full EPF withdrawal rules||The retirement age should be at least 58 years for full EPF withdrawal rules .|
|Increase in age-limit||A member can withdraw 90% of PF corpus before one year of the retirement. Minimum Age for this relaxation was 54 years||The member can still withdraw 90% of EPF corpus one year before the retirement but minimum age should be 57 years.|
|PF withdrawal after leaving job||You can withdraw full EPF corpus after being unemployed at least for 2 months||You can’t withdraw full EPF corpus after leaving the job. The employer’s contribution and interest on it will remain in the PF account till the age of 57.||There would be an EPF corpus at the time of retirement, in every situation.|
|Continuity of PF membership||Once an employee leaves his job and withdraws his total PF balance, the membership ends||The membership would continue as employee would not be able to withdraw the complete PF corpus before the age of 57.|