The Finance Ministry has ratified the hike in the Employees’ Provident Fund (EPF) interest rate to 8.65% for FY19 as approved by retirement fund manager EPFO (Employees’ Provident Fund Organisation), bringing cheer to its 60 million subscribers. From time to time, EPFO keeps looking at options to make the EPF scheme more attractive for subscribers to stay invested even if they switch jobs. But certain emergencies may prompt investors to fall back on their retirement savings. While EPFO strongly advises against treating PF money as a bank account, it still allows its members to make partial withdrawals after 5-10 years of service. Here are 10 important rules about EPF withdrawal:
1. Money from the EPF account cannot be withdrawn during employment. It is a long-term retirement savings scheme, so full money can only be withdrawn after retirement.
2. Partial withdrawal from EPF accounts is permitted in cases of an emergency such as medical emergency, house purchase or construction, wedding, and higher education. Partial withdrawal is subject to limits depending on the reason. The account holder can request online for partial withdrawal.
3. Although the EPF corpus can be withdrawn only after retirement, early retirement is not considered until the person reaches 55 years of age. EPFO allows withdrawal of 90% of the EPF corpus one year before retirement, provided the person is not less than 54 years old.
4. The EPF corpus can be withdrawn if a person faces unemployment before retirement due to lock-down or retrenchment.
5. The EPF subscriber has to declare unemployment in order to withdraw the EPF amount.
6. As per the new rule, EPFO allows withdrawal of 75% of the EPF corpus after one month of unemployment. The remaining 25% can be transferred to a new EPF account after gaining new employment.
7. As per the old rule, 100% EPF withdrawal was allowed after two months of unemployment.
8. EPF corpus withdrawal is exempted from tax but under certain conditions. Tax exemption on EPF corpus is permitted only if an employee contributes to the EPF account for five continuous years. The EPF amount is taxable if there is a break in the contribution to the account for five years. In that case, the entire EPF amount will be considered as taxable income for that financial year.
9. Tax is deducted at source on premature withdrawal of the EPF corpus. However, if the entire amount is less than Rs50,000, then TDS is not applicable. Keep in mind, if an employee provides PAN with the application, the applicable TDS rate is 10%. Otherwise, it is 30% plus tax. Form 15H/15G is a declaration form, which states that a person’s total income is not taxable and thus, TDS is avoidable.
10. An employee does not have to wait for approval from the employer for EPF withdrawal. It can be done directly from the EPFO, provided the employee’s UAN (universal account number) and Aadhaar are linked, and the employer has approved both. The EPF withdrawal status can also be checked online.