Employees Provident Fund Organization (EPFO), regulates The Employee Provident Fund (EPF), which helps employees save a small fraction of their salary every month. It helps to cater the financial requirements after retirement. Salaried employees can choose to withdraw money at the time of any major events like medical treatment, weddings, home renovation etc. Any organization with more than 20 employees is required to be registered with Employees Provident Fund Organization (EPFO).
De-constructing the EPF Structure
In Employees Provident Fund (EPF) account, 12 percent of the basic pay of the salaried employee is contributed towards the fund on a monthly basis. The equal portion is contributed by the employer, and from this contribution, only 3.67% is deposited in the EPF Account and the rest 8.33% is deposited in the employee’s pension scheme. The current rate of interest for an EPF account is 8.65%. This rate keeps on changing every year.
Procedure and Rules for Withdrawing EPF
For withdrawing PF, employees have to submit Form 19, duly signed and attested to their ex-employers. In addition to this, they are required to submit various other documents like resignation letter, canceled cheque etc. to the Employees Provident Fund Organization (EPFO). An employee can withdraw the PF account balance only for some special purposes. It is advised by the experts, to transfer the PF Balance from their previous employer’s account into the account of their current employer, instead of withdrawing it.
The government of India has simplified the process by launching the Unique Identification Number (UAN). This number will remain same throughout the career of an employee.
Purposes for Withdrawal of PF Balance
- Marriage: Only salaried employee, who has completed 7 years of service in the same company can withdraw 50% of the balance contributed in EPF, thrice in a year, for bearing the expenses incurred during the marriage.
- Medical Treatment: A salaried employee can withdraw up to six times of his/her salary or the whole accumulated PF fund for the treatment of spouse, self, children, and parents.
- For Construction or Purchase of Plot: Withdrawing the EPF amount for purchasing a plot of land or for some construction is possible if the property is registered in the name of the employee or spouse. A minimum of 5 years of service is required to withdraw an amount, 24 times that of the salary of the employee. For the construction of property, the amount can be 36 times that of the salary of the account holder. The withdrawal can be done only once during the service of an account holder.
- For House Renovation or Alteration: To withdraw from an EPF account for renovation or alteration of the house, the house should be registered in the name of the employee, spouse, or jointly owned by the spouse. A minimum of 5 years of service is required in order to withdraw up to 12 times that of the salary of the account holder.
- For Repayment of Home Loan: To withdraw from EPF Account for repaying the Home loan, the house should be registered in the name of the employee, spouse or must be held jointly. A minimum of 10 years of service is required for withdrawing up to 36 times of the salary of an account holder.
- Retirement: An individual must be 54 years old to withdraw up to 90% of the amount accumulated in the EPF Account.
- Other Purposes: An employee can choose to withdraw from EPF Account for other reasons also, like for Premature Retirement because of some physical or mental disability or for settling down in a foreign country.
Taxation on EPF Amount
If the employee withdraws the EPF balance before completing 5 years of service, then the balance which is withdrawn is taxable. But if the balance withdrawal is less than Rs. 50,000, then it will be exempted from tax.
For calculating 5 years of service, it is not necessary for the employee to continue the service in one organization only; he may work in different organizations. But whenever the employee changes jobs, he must transfer the balance of EPF to the new company’s PF account. No tax is deducted if the employee withdraws the PF after 5 years of service. If Form 15G and Form 15H are submitted by the employee, then no Tax Deducted at Source (TDS) will be deducted. Form 15H is submitted by the senior citizens and Form 15G is submitted by those who are below the age of 60.
Grievances related to the withdrawal of EPF amount can be resolved by reading the detailed procedure stated in Consumer Protection Act.
Modes for Withdrawal of PF Amount
For withdrawing PF amount, the employee needs to have Form 19. It is either given by the employer or downloaded online from EPF India website. This form must be submitted to the regional office and PF amount along with the interest earned is received by the applicant within a few days.
The following are the ways by which an employee can withdraw his/her PF:
Withdrawal of EPF Without Employer’s Signature
Employees can withdraw EPF from the previous employer without getting it signed. It is quite difficult for the employee to get the form signed by the previous employer after resigning from the job. Earlier, it was mandatory for employees to have the attestation of the form to facilitate withdrawal.
However, now there are two ways to withdraw EPF without the signature of the employer:
With Aadhar card:
- Salary bank account and Aadhar card must be verified by the employer and the details should be furnished in EPFO Portal.
- UAN account should be activated.
- From the EPFO portal download Form 19, Form 31 and Form 10C. Form 19 is for making PF withdrawals and Form 10C is for making withdrawals from your pension benefits.
- Fill the details asked in the form like the name as per aadhar card, registered mobile number, address, PAN card details, date of joining the new organization.
- Attach a canceled cheque to verify the bank account number of the employee.
- Submit the form and the canceled cheque to the nearest EPF office.
- Bank account number should match the canceled cheque. All the details entered should match with the information stated in UAN form. If details are not matched with the details stated in UAN then the employee cannot withdraw from EPFO.
Without an Aadhar card:
EPF balance can be withdrawn without an aadhar card, by following the below mentioned steps:
- Download Form 19, Form 31 and Form 10C from EPFO portal.
Fill the details in the form and get it attested from the authorities like:
- By Manager of the bank in which the employee holds a salary account.
- A Gazetted officer.
- Magistrate/President of Village Panchayat/Notary Public/ Post/Sub Post Master.
- Every page of the form must be signed and bank details must be verified.
- Attach indemnity bond with Rs. 100 stamp paper.
- A copy of pay slips, appointment letter, form 19 and employee’s ID card must be attached.
- Copy of Know Your Customer (KYC) document is to be attached before submitting the form to the EPF office.
Reasons which State that Pre-Mature PF Withdrawal is not a Good Option
There are many reasons which state, that PF withdrawal is not a good option. Some of the reasons are:
- It is a retirement benefit, which is helpful at the time of retirement.
- If the amount is withdrawn before 5 years then the employee is liable to pay tax.
- PF can be transferred easily even after switching to a new job. So, it can be used as a saving.
EPF is a retirement benefit which is given to the employees. This amount is transferred to EPF account and can be withdrawn by the employee for special purposes. If it is withdrawn before completion of 5 years of service, then it is taxable.