In this article, Rakesh Guptawho is currently pursuing M.A. IN BUSINESS LAWS, from NUJS, Kolkata, discusses Employee Provident Fund Withdrawal Rules and Taxes.
A Provident Fund is a scheme developed by the Central Government which gives financial security to employees after their retirement. It is the part of employee salary structure. As per the scheme, a percentage from employee’s salary is deducted and added to his provident fund account every month and his employer would also require contributing the same percentage of the amount to the employee’s provident fund account. In India, there are three types of provident funds, i.e., Public Provident Fund for the public, Employees Provident Fund (EPF) for private sector employees and General Provident Fund (GPF) for Government employees.
Employee Provident fund (EPF)
The Employee Provident Fund (EPF) is governed by Employee Provident Fund Organization (EPFO), a statutory body under (Labour Ministry) Ministry of Finance, India. It helps private sector employees to save a small portion of their salary every month. This scheme helps them to fabricate a corpus which is duty excluded for use in the fag end of their lives or retirement. Employee Provident Fund is a long haul reserve funds apparatus, fundamentally went for a calm retirement, salaried representatives may pull back their cash in their EPF record to take into account diverse budgetary prerequisites or at the season of any real life occasions, for example, weddings, home remodel/adjustment and medicinal treatment among others. The amount is deposited at the Employee Provident Fund Organization (EPFO). The investments made by a number of employees are pooled together and invested by a trust. EPF covers following three schemes.
- Employees’ Provident Fund Scheme, (EPS) 1952
- Employees’ Pension Scheme, 1995 (replacing the Employees’ Family Pension Scheme, 1971) (EPS).
- Employees’ Deposit Linked Insurance Scheme, (EDILS) 1976.
As per Employees Provident Fund Act, rules and regulations, 12% of the basic pay of a salaried employee (in addition to dearness allowance and cash value of food allowances, if any) is deducted from his or her salary on a monthly basis as a contribution towards an EPF account. However, an employer contributes 8.33% in the Employee Pension Scheme (EPS) while only 3.67% is deposited in the Employee Provident Fund account. The current rate of interest on provident fund deposits (for the financial year 2016-17) for an EPF account is 8.65% p.a. The rate of interest is subject to change every year, as announced every year by Employee Provident Fund Organization apex body.
All associations which have hired more than 20 employees ought to obligatorily enrol with EPFO. To make the ideal utilisation of the EPF account, salaried representatives must know about what a provident reserve account involves and how it is worked.
As per the EPF Scheme withdrawals are not permitted from the EPF account until the worker has stopped working or is independently employed. The money from the EPF account can be withdrawn if the employee doesn’t have any job. PF exchanges are permitted if the holder changes employments. If an employee decides to withdraw money from his EPF account after quitting the job, he needs to submit a declaration mentioning the reasons for the same.
Employee Provident fund (EPF) withdrawal Rules
The Employees Provident Fund scheme has become the retirement saving scheme in the true sense. The Labor ministry of India issued a gazette notification about the changes in withdrawal rules EPF Act, with effect from 10th February 2016 but it was withdrawn on 19th April 2016 due to the pressure from the various trade unions. The changes brought in by the government was
- Retirement age of an employee increased from the current 55 years to 58 years.
- An Employee can withdraw 90% of EPF balance once he reaches the age of 57 years.
- An Employee cannot withdraw Employer contribution to EPF before 58 years.
- EPF membership does not end with leaving the job.
- Government plans to start online facility for EPF withdrawal in Aug 2016.
Let’s go through these changes in detail
Retirement age increased from the current 55 years to 58 years
As per earlier Employee Provident Fund rule, the retirement age of an employee was 55 years. From 10th February 2016, the retirement age was increased to 58 years. In today’s global scenario retirement age is 58 years across all industrial sectors, so this change is keeping in step with times.
Withdraw 90% of EPF balance once an employee reaches the age of 57 years
Earlier the retirement age of employee as per EPF rules was 55 years. Therefore one was allowed to withdraw 90% of his EPF balance one year prior to retirement i.e. at the age of 54 years. With these new rules, the age of retirement has been increased to 58 years, now the employees will not be able to claim withdrawal of their provident fund after attaining the age of 54 years. They would have to wait till attaining the age 57 years. But the change is that now under this facility, the employee would be able to withdraw 100% of his contribution and interest earned on it unlike 90% of the total accumulations earlier.
Restriction on withdrawal of Employers contribution to Employees Provident Fund before 58 years. (This new rule has been withdrawn)
As per the notification dated 10th February 2016 any person who is a subscriber to Employers Provident Fund cannot withdraw the employer’s contribution to EPF before the retirement. The employer’s portion can be withdrawn only after attaining the retirement age (58 years). It is to be noted that the withdrawals from the Employers Provident Fund within five years of joining are still taxable. The problem that the Employers Provident Fund would face is whether it would pay interest on Employer share which one is not allowed to withdraw. ‘The inoperative account rule of Employers Provident Fund says that an Employers Provident Fund account would not earn interest if there is no contribution for 3 years’. Now onwards, there would be several Employers Provident Fund account without contribution as people would not be able to withdraw their full Employers Provident Fund corpus. Will such account not give any interest after 3 years? The rule says
“A member, who ceases to be in employment and continues to not be employed with a covered establishment for at least two months, may be permitted to withdraw only his own share of contribution, including interest earned thereon. The requirement of ‘two months’ period referred above shall not apply in the case of female members resigning from the service for the purpose of getting married or on account of pregnancy/ childbirth.”
Employee Provident Fund membership does not end with leaving the job
As per the notification dated 10th February 2016 subscriber to Employees Provident Fund cannot withdraw the EPF contribution by the employer before the retirement. The employer’s part can be withdrawn after attaining the retirement age (58 years). Since one can’t withdraw the 100% of the PF balance, your Employee Provident Fund account is not closed. As per earlier Employees Provident Fund rules, the membership was linked with the employment. One becomes a member of Employee Provident Fund with the joining of a new job. Once the subscriber to Employee Provident Fund become jobless and withdraws his Provident Fund balance, the membership expires.
But now Employee Provident Fund membership would continue up to the retirement age. The Employee Provident Fund membership has become independent of the job. Since one can’t withdraw the 100% of the Provident Fund balance, the membership is bound to continue.
Employees Provident Fund is an important part of most of the salaried persons. It can help one, at times when he is pressed for money in life. If any person who have already worked for years like 5-20 yrs., he must have accumulated a good amount in his Employee Provident Fund account. Such employees may withdraw money from their Employee Provident Fund accounts for various purposes, subject to certain conditions. Individuals have to furnish several documents in addition to meeting the eligibility criteria as perEmployee Provident Fund withdrawal rules. The list of purposes and quantum of contribution which can be withdrawn are listed below:
Situations when an employee can withdraw money from Employee Provident Fund account while on employment
Hereunder are those major landmarks in life or reasons for which an employee can take out the money from his Employee Provident Fund account
- Marriage Purpose of Self, Sibling, and Children
- Education Purpose of Self + Children
- Repairs/Alteration of Existing House
- Repayment of Existing Home Loan
- Purchase/Construction of House or Flat
- For Medical Treatment
Specific Rules for specific situations
Marriage purpose for self, children, and siblings
Any salaried employee can withdraw from his Employee Provident Fund account for the occasion of marriage if he has completed 7 (seven) yrs. of service. He can avail this facility 3 (three) times in life (during his tenure/service) and the maximum amount he can withdraw cannot be more than 50% of the “Employee share” in Employee Provident Fund account. For this purpose, part of employer’s contribution is not considered for withdrawal. So even if Employee Provident Fund account total balance is Rs 15 lacs, the whole amount is not considered for calculation purpose, only employees own contribution and interest on that amount are used for calculation purpose. This is applicable for the marriage of
- Son or Daughter
- Brother or Sister
For the purpose of withdrawal, the employee needs to provide the full address of venue, marriage date in Form 31, and also attach some proof of weddings like Marriage invitation or the bonafide certificate of the fees payable and give it to his employer for verification and processing.
Education of Self + Children
A salaried employee can also withdraw for education expenses for self and children. This is valid only for post matriculation educational expenses. By post-matriculation, it means after 10th standard. So if any subscriber is admitting his child to any college or university for graduation or post-graduation or any other professional course, he can withdraw from his Employee Provident Fund account. But this can be availed only after 7 (seven) yrs. of service and the maximum amount can be withdrawn is 50% of own contribution.
This can be used for maximum 3 (three) times in employees lifetime, but this 3 (three) times also includes the “marriage” as the reason. So the fact of the matter is, for Marriage or Education purpose, you can withdraw for maximum 3 (three) times in total.
Purchase/Construction of House/Land
If a salaried employee plans to buy or construct a house ORpurchase a land, then he is eligible to withdraw some limited money from his Employee Provident Fund account once in a lifetime.
Here are some of the rules which need to fulfilled
- The house/land should be on employees name or his/her spouse name or jointly in their name i.e. employee and his/her spouse (no other combination is allowed)
- Employee should have completed 5 yrs. of tenure in his employment
- If purchasing a land, the maximum permissible amount is 24 times of monthly wages.
- If purchasing or constructing a house/flat then, the permissible limit is 36 times of monthly wages (including the acquisition of land also)
The property in question should be free from any dispute or encumbrances to avail this facility. Also, the property should be registered and a proof of registration must be given to get this facility.
Repayment of Existing Home Loan
If an employee has a home loan, then he can withdraw some part of his/her Employee Provident Fund money to repay his home loan. But for this purpose, the employee needs to have minimum 10 yrs. of service. This facility is available only once in his/her lifetime and this time limit is, clubbed with the above- mentioned reason (3rd) above. Therefore one can either withdraw money from Employee Provident Fund account for purchase/construction of house or repayment of house loan, not both.
The property should be registered in the name of self, spouse or jointly registered with a spouse. The employee won’t get the benefit if the loan is taken jointly with father, mother, and siblings. The maximum amount one can withdraw is up to 36 times of monthly wages. The money to be received under this clause can be taken from self-contribution and employer contribution in Employee Provident Fund. To get the money under this clause one needs to provide the proof for house agreement, the sanction of house loan and some other documents as asked by the Employee Provident Fund Organization (EPFO) office. The money will be issued directly to the lender bank.
Repairs/Alteration of Existing House
If a salaried person wishes to withdraw from an Employee Provident Fund account for the purpose of house renovation or alteration, he needs to follow certain rules regarding this purpose. These rules are
- The maximum money employee can withdraw is 12 times of his/her monthly wages
- The house should be more than 5 yrs. old after construction completion date.
- Employee should have completed minimum 10 yrs. of service
- Employee can avail this facility only once
- The house should be in the name of self, spouse or jointly with spouse
For the above purpose, money can only come out of employees own contribution, not employer’s contribution
A salaried person can withdraw money from his Employee Provident Fund account for a medical treatment for self, parents, spouse and children in following 3 situations (anyone, not all)
- More than I month of hospitalisation (for any reason), or
- Major surgical operation in a hospital, or
- If one is suffering from T.B., leprosy, paralysis, cancer, mental derangement or heart ailment and having been granted leave by his employer for the treatment of the said illness.
The benefit of this clause is that one can withdraw the money anytime in his service tenure. There is no requirement that, one must have completed a minimum/specific number of years in service/job. Even if one has been in service for just 1 yr. or 2 yrs., he can still withdraw money for medical treatment. The maximum money can be withdrawn is 6 months wages. This benefit can be taken anytime and for any number of times during a lifetime.
There are some documents which need to be produced and submitted along with Form 31
- A certificate from an employer stating that member is not getting the benefit of Employees’ State Insurance Scheme facility
- A certificate from an eligible doctor stating the medical illness to the member and time period for which hospitalisation is required.
Every employee subscribed to Employees Provident Fund scheme can choose to withdraw from their Employees Provident Fund account for other reasons as well
- Premature retirement due to any physical or mental disability
- Going abroad for the sake of better employment or
- Settling down in a foreign country.
Tax Implication on Employees Provident Fund Withdrawal
Tax on Employees Provident Fund money withdrawal is the main concern of the employees who leave early. Most of us know about the tax-free nature of Employees Provident Fund. The Employee Provident Fund is also considered most reliable retirement corpus. There is no chance of default. Subscribers will get a better interest rate and no one can take away provident Fund corpus. Beside this Provident Fund is totally tax exempt. We have a common perception that Employees Provident Fund does not have any tax tension.
But, very few of us know that the Provident Fund corpus can also be subject to the ‘tax cut’. Provident Fund balance can be reduced by 34.6%. One may only get 65.5% of Provident Fund money. The TDS (tax deducted at source) can dent PF balance severely. There is a provision of the tax on the premature withdrawal of Employees Provident Fund.
Tax Treatment of Different Provident Funds
There are four types of provident fund, which give tax concession. The following table has been taken from the Income tax website. The table shows the tax treatment of provident funds. Please do read the note given below the table.
|Statutory Provident Fund||Recognized Provident Fund||UN-recognized Provident Fund||Public Provident Fund|
|Employer’s contribution||Exempt from tax||Exempt up to 12% of salary (Note 1)||Exempt from tax||Employer does not contribute to such fund|
|Employee’s contribution eligible for deduction u/s 80C||Yes||Yes||No||Yes|
|Interest credited to the said fund||Exempt from tax||Exempt from tax if the rate of interest is upto 9.5%. Interest in excess of 9.5% is charged to tax.||Exempt from tax||Exempt from tax|
|Amount received at the time of termination of service||Exempt from tax|
If certainconditionsare satisfied, then lump sum amount is exempt from tax
|If certainconditionsare satisfied, then lump sum amount is exempt from tax||Exempt from Tax|
Salary for this calculation includes the following components
- Basic salary,
- Dearness allowance
- Commission based on a fixed percentage of turnover achieved by the employee.
Tax Benefit of Employees Provident Fund
As mentioned in the table, the Employees Provident Fund enjoys many tax benefits. The Employees Provident Fund saves your tax in following ways:
- Employer’s contribution to Employees Provident Fund account is exempt from tax. This exemption is subject to 12% of employee’s basic salary plus DA.
- The interest on employer’s contribution is also exempt from tax.
- The employee’s contribution toward Employees Provident Fund is also eligible for tax deduction under section 80C of the Income- tax Act.
- The interest on the employee’s contribution is also tax exempt.
Tax Benefit Is Subject To Minimum Service Requirement
An investment which gives tax deduction comes with a lock-in period. Except for the ELSS, all other tax saving investments has a minimum lock- in period of 5 years. So is the case with Employees Provident Fund. The investment in Employees Provident Fund may give tax benefit up to 30%, but it depends upon the tax slab one has been in all previous years.
Therefore, if employee/s does not complete the minimum investment requirement of 5 years, the above tax exemption and deduction would be void.
Return Back of EPF Tax Benefit
If any employee withdraws from Employees Provident Fund balance before 5 years’ service all his tax saving will become null and void.
- The person has to return back the tax deduction because of the employee EPF contribution. The employee must have taken the 80C tax benefit on the EPF contribution. It is also calculated financial year wise
- The interest on PF contribution will become the part of other income. It would be added in the tax calculation of every financial year.
TDS on Employees Provident Fund
The new TDS rule of Provident Fund is painful for most of the employees as the percentage of TDS can be deducted are 34.6%. In Income- tax it is said to be the maximum marginal rate. The 34.6% tax is huge, that too of Employees Provident Fund corpus. It would be really very frustrating if one gets Employees Provident Fund money after such a big deduction.
Conditions of TDS on Employees Provident Fund Withdrawal
The Employee Provident Fund Organization (EPFO) can deduct tax at source (TDS) only if an employee falls under the following two criteria.
- The employee has not completed total 5 years of continuous service.
- The EPF withdrawal amount is more than 50,000. (Earlier this limit was Rs 30,000).
‘5 years of continuous service mean aggregate service’. The person may have worked in different organisations, but total service period should be more than 5 years. However, the following points should be considered while calculating the continuous period of service.
- The employee must have transferred the Provident Fund balance of the previous organisations. If you have withdrawn the PF balance of previous employment, the service period of the employment is not considered for continuous service.
- Employee’s previous service period would not be added to recent service period unless he transfers the previous Provident Fund balance.
However, one can minimise or avoid TDS on Employees Provident Fund withdrawal if you fulfil some requirements
Relaxation of TDS from Employees Provident Fund withdrawal
- If employee has submitted PAN
- If an employee has given the PAN, the TDS would be 10% instead of 34.6%.
- If Employee has submitted Form 15G/ 15H
If an employee submits form 15 G with the Employees Provident Fund withdrawal form, the TDS would not be applicable. The form 15G/15H is a self-declaration that total income (including Employees Provident Fund corpus) is within the tax- free limit.
No TDS for Most of the Employees
A number of employees leave the job after 5 years of service. Therefore, they need not worry about the TDS of Employees Provident Fund. The following points need to be remembered:
- The Employees Provident Fund maturity amount is tax-free if one is engaged in the continuous service of more than 5 years.
- If the service termination is beyond employees control. If you are out of a job because the lockout, retrenchment or medical condition, the rule of TDS would not be applicable.
Ways to Avoid Tax on Employees Provident Fund Withdrawal
Early Provident Fund withdrawal can leave the salaried person in a heavy tax burden. Besides this, there are other hassles as well. But if one plans properly, tax and hassles can be avoided
- One must avoid withdrawing Employees Provident Fund after every job switch. This might compel the person to pay tax after every withdrawal. Instead, Provided Fund transfer will save tax.
- If one is taking a small break from the job, don’t withdraw the Employees Provident Fund balance. One can transfer the Employees Provident Fund balance after joining the service again. A Provident Fund account gives interest till 3 years of non-contribution.
- If one is leaving a job and switching to a business or profession. Wait for completion of 5 years.
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If the amount is less than Rs 50,000, no TDS is deducted, however, if the individual falls under the tax bracket, he or she has to offer such EPF withdrawal in his return of income. If the amount is more than Rs 50,000, then 10 percent TDS is deducted if PAN is not furnished.
If employee withdraws amount more than or equal to Rs. 30000/-, with service less than 5 years, then a) TDS will be deducted @ 10% if Form-15G/15H is not submitted provided PAN is submitted. b) TDS will be deducted @ maximum marginal rate (i:e. 34.608%) if employee fails to submit PAN.
If you wish to withdraw the amount in your PF account after 5 years of continuous service (membership of the account) then the entire amount including the principal and interest withdrawn by you shall be tax-free. The interest earned with respect to your contribution and your employers' contribution is exempt from tax.
As per the provisions of the Income-Tax (I-T) Act, 1961, the accumulated balance in EPF that is payable to an employee is excluded from the computation of the total income, in case certain conditions are met. This means the withdrawal is exempt from tax and the individual need not show the same in the return as income.
The first R25 000 of your provident fund withdrawal is not taxed, so if this is your first (retirement fund) withdrawal you will pay no tax, If it is your second, you would most likely pay tax at 18%.
- The member withdraws amount which is usually blown away by discretionary expenses and retirement savings are back to square one.
- If the individual withdraws his Provident Fund balance before completing five years then the amount becomes taxable.
Tax will be levied at 20% on such income for EPF members whose retirement savings accounts have not been linked to their Permanent Account Number (PAN), while the rate will be 10% for those who have linked their tax and EPF accounts.
Lump sum payments
A lump sum payment is a one-time payment that is taxed and reported differently to your salary and wage income. You include lump sum payments as assessable income in your tax return in the income year you receive the payment.
When you take your entire pension pot as a lump sum – usually, the first 25% will be tax-free. The remaining 75% will be taxed as earnings.
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 1 year before retirement, provided the person is not less than 54 years old.
As already mentioned, in order to make it an ideal saving for retirement it is always better to transfer the PF balance instead of withdrawing. This is also advisable from the tax standpoint as withdrawal of PF within 5 years of continuous service attracts tax.
The maximum allowed amount that can be taken out of your EPF is 50% of employee's share at the time of withdrawal application. The number of times you can withdraw for the same purpose is three.
Public Provident Fund (PPF)
PPF provides deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act for the amount invested during the financial year. Since PPF falls under the exempt category, the interest and maturity amount are exempt from tax.
It covers corporations that have a strength of 20 or more employees and in certain conditions with certain requisites and exemptions, organizations that employ lesser than 20 employees are also included in this scheme.. The employee pays about 12% of his income while the employer matches the 12% the employee pays by contributing from the basic wages, dearness allowance and allowing retaining allowance.. Before the age of 55, if an employee is out of employment for 30 days, he or she can withdraw 75% of the amassed balance and withdraw the remaining 25% after another 30 days.. The UAN contains the member ID of the employee and in case the employee has worked in multiple firms, each of the firms would give him a separate member ID to which the EPF scheme is transferred.. The basic requirements for withdrawal of EPF are the UAN of the employee, Employee’s Aadhar number be linked with the EPF, and the bank account linked with the EPF to be the same as linked with the Aadhar too.. To avoid tax impositions on their EPF withdrawals, employees are requested to have completed five years of continuous service.. Tax is applied to withdrawal of EPF only when the employee tries to withdraw his/her EPF before the completion of five years of continuous service.. In the case that there is a need to withdraw PF by the employee before the completion of the five-year continuous service, a tax of 10% (Tax deducted at source [TDS]) is levied on the withdrawal amount.. The employee is also exempt from this tax imposition if his/her employment is terminated by their employer due to the shutdown of the company or for any other reasons that are beyond the control of the employee.
The Employees Provident Fund, more shortly known as EPF (not to be confused with Environmental Protection Fund) is more or less a pension scheme which you pay for yourself when you hold a job in the corporate sector.. It covers corporations that have a strength of 20 or more employees and in certain conditions with certain requisites and exemptions, organizations that employ lesser than 20 employees are also included in this scheme.. The employee pays about 12% of his income while the employer matches the 12% the employee pays by contributing from the basic wages, dearness allowance and allowing retaining allowance.. It is however wrong to assume that the entire amount the employer pays goes to the EPF.. A portion of the employer’s amount is retained in the Employees’ Pension Scheme (EPS).. At the beginning of retirement when the employee withdraws his/her funds, he or she gets all of the money, both of the EPS and the EPF along with interest calculated on it [i]. The process for claiming of withdrawal of EPF is a simple one.. A 2.5-year term at one place and another 2.5-year term at another place is considered as five years continuous service and therefore is now exempt from tax imposition during withdrawals.. Once you know that you’re eligible, the PF numbers of your previous and current employer needs to be entered.. This will complete the process of the transfer of PF [iii] .. Tax is applied to withdrawal of EPF only when the employee tries to withdraw his/her EPF before the completion of five years of continuous service.. The employee is exempt from the imposition of this tax if the PF withdrawal amount is less than 50,000.
Employees must contribute 12% of their basic pay every month towards the EPF account as per the EPF norms.. This article covers the PF withdrawal rules for different purposes and taxes on EPF withdrawals.. Home Loan Repayment Should have been in service for more than ten years.Least of the: Up to 36 times of Monthly basic salary plus dearness allowance; Total corpus consisting of employer and employer’s contribution with interest; Total outstanding principal and interest on housing loan.a.. Partial Withdrawal before Retirement Can withdraw up to 90% of the accumulated balance plus the interest.The account holder must be at least 54 years, and withdrawal must be made before one year of superannuation or retirement.No other conditions Non Receipt of Wages No eligibility criteriaYour share (employee’s share) with interest.You haven’t received wages for a period of more than two months continuously (other than a strike).. Following are the PF withdrawal rules for withdrawing the corpus before five years of continuous service:. EPF contributions have the following four components to them – Employee’s contribution, Employer’s contribution and the interest on both the deposits.. Following are the PF withdrawal rules for withdrawing the corpus amount after retirement:. In case if you did not complete ten years of service by the time of your retirement you will be able to withdraw the entire EPS sum along with the EPF amount.. EPF withdrawals before five years of continuous service attract TDS.. If you do not withdraw the EPF funds post three years of retirement, you will have to pay tax on the interest earned.
Every employee under the Employee Provident Fund scheme has to mandatorily contribute 12% of their Basic Pay plus DA and Retaining Allowance (if any).. Every employee is allowed a tax-free withdrawal of his entire Employee Provident Fund corpus which includes- Employer contribution, Employee contribution, and the interest accrued, on attaining 58 years of age.. However, as per the latest Provident fund rules, it is also possible to withdraw the Employee Provident Fund before retirement, if the employee has remained unemployed for 2 months.. If after leaving the job, someone chooses to do self-employment, or not getting into formal employment and thus has stopped contributing to Employee Provident Fund, provident fund rules state that the balance would continue to earn interest till 58 years of age but it would not be tax-free.. As explained in the article above UAN, KYC and technology have made the operation of Employee Provident Fund Account hassle-free, and the withdrawal and advance rules give the necessary flexibility in the otherwise locked in the product, so you may use this to the full advantage.. What is Employee Provident Fund/EPF Scheme?Employee Provident Fund scheme, which can be used for supplementing the retirement corpus of salaried individuals.. Employee is allowed a tax-free withdrawal of his entire Employee Provident Fund corpus which includes- Employer contribution, Employee contribution, and the interest accrued, on attaining 58 years of age.. For new employees, the employer generates their UAN through the EPFO website, which needs to be activated by the employees by providing necessary KYC documents.. Every employee is allowed a tax-free withdrawal of his entire Employee Provident Fund corpus which includes- Employer contribution, Employee contribution, and the interest accrued, on attaining 58 years of age.However, as per the latest Provident fund rules, it is also possible to withdraw the Employee Provident Fund before retirement, if the employee has remained unemployed for 2 months.He may withdraw 75% of the accumulated corpus after 1 month and the balance 25% after 2 months of unemployment.. PF transfer is required to link the new member ID of the employee to the UAN in the event of job change so that the existing balance of the EPF with the previous employer get transferred to the new employer.. If you do not withdraw your PF within 3 years of retirement, the account becomes inoperative and rules say that, if the accounts has remain inoperative for 7 years, the unclaimed amount has to be transferred to Senior Citizens’ Welfare Fund
Recently, the Employees Provident Fund (EPF) rules were relaxed to enable members of the Employees’ Provident Fund Organisation (EPFO) to withdraw money from their EPF accounts for home loan to purchase property or for construction of the property.. The Employees’ Provident Fund Organization (EPFO) was founded under the Employees’ Provident Fund Act, 1952.. The Employees’ Provident Funds Scheme 1952 (EPF) The Employees’ Pension Scheme 1995 (EPS) The Employees’ Deposit Linked Insurance Scheme 1976 (EDLI). The Employees’ Provident Fund scheme was started in 1952 under the Employees’ Provident Fund Act.. The Employees’ Provident Fund is a fund that has a monthly contribution from both employees and employers.. The main aim of the Employees’ Pension Scheme is to provide pension to employees of the organised sector to receive pension post-retirement when their age is 58 years.. Member’s Monthly Salary = Pensionable salary X Pensionable service / 70 Pensionable Salary Pensionable salary: The average of the monthly salary of the employee in the previous 12 months until the employee leaves the employees’ pension scheme.. In addition to the employee and employer contribution to EPFO, the employee has an additional option to increase the contribution to EPFO via Voluntary Provident Fund (VPF).. The EPF scheme run by the EPFO under the Employees’ Provident Fund Act, 1952 applies to all organisations employing 20 or more people and in certain cases even if the number of employees is below 20, provided certain terms and conditions are met.. Under this scheme, both the employer and employee contribute to the fund, and the employee gets a lump sum amount with interest post-retirement.. The various forms used for EPF withdrawal are Form-31 (PF advance), Form 10C (Pension withdrawal) and Form 19 (Only PF withdrawal). The employer contribution is divided into following schemes with 8.33% of the contribution towards Employees’ Pension Scheme and 3.67% of the contribution towards Employees’ Provident Fund.
Contributions to the employees’ provident fund or the PF qualify for tax deduction under Section 800C of the Income Tax Act .. The interest on employer’s contribution is also exempt from tax.. The interest on the employee’s contribution is also tax exempt.. The lock-in for PF contributions to be tax free at the time of withdrawal is that the contributions must complete a minimum investment period of five years, for the above tax exemption and deduction to apply.. In case of early exit, you must pay the income tax; you have saved because of the EPF contribution.. The employee must have taken the 80C tax benefit on the EPF contribution.. Deduct the employee contribution from the total 80C investment amount.. The EPF withdrawal amount is more than 50,000.
PF or Provident Fund is a benefit-based retirement scheme offered by The Employees’ Provident Fund Organisation (EPFO) in India.. PF Withdrawal. ReasonEligibility Limit Unemployment An account holder has been unemployed for not less than one month75% of the total accumulated amount after 1 month of unemployment Remaining 25% if unemployment is beyond 2 monthsFor own education or child’s education after class 10Should be in service for a minimum of 7 yearsUp to 50% of employee’s contribution to EPFMarriage of self/children/siblingShould be in service for a minimum of 7 yearsUp to 50% of employee’s contribution to EPF Medical treatment of self/spouse/children/parentsNo minimum service required 6 months’ basic salary and Dearness Allowance, or total employee’s contribution, whichever is lessPurchase/construct a house or landShould be in service for a minimum of 5 years24 months’ basic salary to purchase a land plot36 months’ basic salary to purchase or construct a houseHome Renovation 1.. One year before retirement/superannuation 90% of the accumulated amount plus interestPay Existing DebtShould be in service for a minimum of 10 years36 months’ basic salary + DA Given the economic and global changes, the government announces new rules regarding PF withdrawal now and then.. The rule states that taxation will apply to the interest on contributions above Rs.2.5 lakh in PF account.. You can withdraw 75% and the remaining 25% of PF balance after one and two months of unemployment, respectively.. As withdrawals after five years of service attract no TDS, try to defer withdrawing funds.. Do we need to ask our employer before withdrawing PF?. If you are withdrawing your PF balance online, you do not have to ask or inform your employer.
The employee contributes a fixed percentage of his salary towards these funds and in many cases employer also contributes.. Scheme of the Government set. up under the PF Act, 1952. Such a provident fund is recognised provident fund. Own scheme of provident fund. Employer’s contribution to provident fund. Employer does not contribute. Employer's contribution: Contribution by the employer to the approved superannuation fund is exempt upto ₹1,50,000 per year per employee.. Interest on accumulated balance: Payment from the fund: Any payment from an approved superannuation fund shall be exempt if it is made:
The EPF Organization of India has instructed all employers to contribute a portion of their employee’s salary into the provident fund.. Section 68-BB , the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952), states the withdrawal provisions for repayment of loans in exceptional cases.. As per the EPF Act, both the employer and employee must contribute 12% of their remuneration.. Nevertheless, Employee Provident Fund Organization has imposed certain restrictions on early withdrawal of whole provident fund amount to benefit employees even after retirement.. In this case, the employee can withdraw up to 6 times his monthly salary or entire provident fund amount.. Section 68-B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952) states the withdrawal provisions for purchasing a residential property.. Employees interested in investing in buying and constructing a house are eligible for special benefits.. For conducting the online PF withdrawal process, Form 19 and Form 10C is required.. Therefore, when the purpose of the withdrawal is unemployment, the individual requires attestation from a gazetted officer.. An employee can withdraw the Provident Fund only after retirement.. 90% of the Provident Fund could be withdrawn by an employee 1 year before retirement.. Section 68-NN of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952) states the withdrawal provisions within one year before retirement.. PF Withdrawal Process is governed by the Employees’ Provident Funds and Miscellaneous provisions Act, 1952 (EPF & MP Act, 1952).. Section 14AB of EPF & MP Act 1952 specifies thatan offence in regard to the default in making payment of contribution by the employer is punishable under this Act and therefore shall be cognizable.. Section 14B of EPF & MP Act 1952 states that in the event of default in making the payment of contribution by an employer; the Central Provident Fund Commissioner or such other officer having such authority holds the right to recover from the employer by way of penalty such damages, not exceeding the amount of arrears.
Here is a look at when contributions, interest earned and withdrawals from one's EPF account will become taxable.. However, in case there is no employer contribution to the EPF account, which is usually the case for government sector employees, then interest will be tax-exempted for the employee's own contribution up to Rs 5 lakh in a financial year.. The right nominee is the person to whom you bequeath assets in your will.. If you don't create a will, the right nominee is the heir to the asset as per succession laws.. Sometimes the person one nominates to receive money from his/her fixed deposit is not the same as the person to whom one bequeaths the same FD in the will.. The bank will, normally, pay the money to the nominee and he/she will be required to transfer it to the legal heirs as per their entitlement.. When withdrawal from EPF account is taxable. Raote says, "If the withdrawal from EPF account is made after working for 5 continuous years, then such withdrawal is exempted from tax.
Any contributions made to your provident fund prior to the 1 st of March 2021, including the growth thereon, are deemed to be the ‘vested’ portion of your provident fund and will not be subject to the 2/3 rds annuitisation rule.. However, from the 1 st of March 2021, provident fund members who are younger than 55 years of age will see any further contributions on or after 1 March, and the growth thereon, deemed as the ‘non-vested’ portion of their fund, the value of which will be subject to the 2/3 rds annuitisation rule upon retirement.. The current legislation that allows for any member of a pension fund or retirement annuity – whose fund value is R247,500 or less at retirement – to take the full benefit as a lump sum remains in place for both the vested and non-vested portions of a provident fund.. A provident fund member who is 55 years or older at the 1 st of March 2021 will not be subject to the new rules for provident funds, regardless of whether further contributions are made from the date the amendments came into force.. At retirement Mr. Smith will be able to withdraw the entire value as a lump sum, subject to tax, as he did not leave the ABC provident fund.. His accumulated fund value with XYZ provident fund of R736,666, which would be classified as non-vested, would then be subject to annuitisation and he would only be able to withdraw 1/3rd of the fund value as a lump sum, with the remaining 2/3rds used to purchase an annuity.. The benefit of a guaranteed/traditional annuity is that there is no capital risk, i.e., negative market movements will not impact your annuity income amounts.
Anyone who deserves to avail the GPF amount in your absence can get regarded as a nominee.. During the withdrawal of GPF, the nominee won’t get interrogated about any documents.. It is the average amount in your GPF amount for 3 years.. In case no nominee’s chosen, the family will get credited with GPF.. In good news for all the government employees of India, the norms for GPF withdrawal have relaxed.. You can withdraw GPF after completing 10 years of service, as against 15 years of service earlier.. You can now withdraw up to 12 months’ salary or 75% from GPF.. For such cases, you will get permitted to withdraw 75% of the amount at discard in the GPF account or 75% of the vehicle’s cost.. Earlier, it allowed withdrawing 90% GPF before a year of retirement without any cause.. In case of emergency, the nominee can sanction for GPF.. If you’re a temporary government servant, you can subscribe to GPF after a continuous service of 1 year.. You can withdraw about 90% of your GPF before 2 years of your retirement.
For withdrawal of money from the provident fund, the first thing you need to check is whether your Provident Fund account is opened with the Employees’ Provident Fund Organization or with the company’s PF trust.. PF withdrawal reasonMinimum servicePF Withdrawal Limit House Construction or purchase of plot for self, spouse or joint3 years90% of PF balanceHome Loan Repayment of self, spouse or joint3 years90% of PF balanceHouse renovation or alteration of self, spouse or joint5 years from completion of house12 times of the basic salary or employee share with interest (whichever is lower)Marriage of self, siblings and children7 years50% of PF balanceMedical treatment of self, parents, spouse and childrenNot required6 times of his or her monthly salary or total corpus (whichever is lower)Apart from the above mentioned the other reasons for partial withdrawal can be made are,. If you have any of the above reasons for partial withdrawal then by following the condition on the terms of service you can withdraw from your Provident Fund account.. If you wish to withdraw the entire amount from your Provident Fund account then your termination should be on the account of any of the reasons given below,. To make an online claim it is mandatory to link your Aadhaar number with your Provident Fund account through the EPFO website.. It is mandatory to link your Bank Account with your EPF account to claim your Provident Fund account money.. If you are withdrawing from your Provident Fund account after 5 years of continuous employment then it is not mandatory furnish your PAN details.
General Provident Fund (GPF) 101: Guidelines, Interest Rate, How To Open An Account And Withdrawal Rules ›
If you are a Government employee, you can open a General Provident Fund (GFP) account.. How to open a GPF account?. General Provident Fund is a type of Public Provident Fund (PPF) account beneficial for every government employee.. General Provident Fund is a type of Public Provident Fund (PPF) account beneficial for every government employee.. General Provident Fund can be given to any salaried individual.. The individual is not required to submit any document while withdrawing the amount at the time of retirement.. A subscriber has to mention the name of a nominee (family member) in the form while taking General Provident Fund.. A person desiring to open a General Provident Fund account must go through these vital guidelines.. A subscriber can mention more than one person as a nominee, but his/her GPF details must be cleared while signing the form.. The amount saved in the General Provident Fund account will mature at the time of the subscriber’s retirement.. Ans: The full form of GPF is General Provident Fund.. What is the amount of salary deducted by GPF?. Ans: General Provident Fund deducts 6% money from the basic salary of an individual.. Because the General Provident Fund scheme is only for the government employees.
The Employee Provident Fund (EPF) is an investment scheme introduced by the Employees Provident Fund Organization (EPFO) of India, which is an organ of the Labour and Employment Ministry of the Indian Government.. Employee Provident is a retirement benefits scheme, and any salaried employee can join an EPF.. How do I open an EPF Account?. EPF current rate of interest Interest cost on EPF for FY 2020-2021. By the rules and regulations of the Government of India, only the employer, individual or organization can open an EPF account, on behalf of its employees.. Almost every legitimate organization has an EPF account for its employees.. After processing and verification, the EPFO activates the EPF account, and an account number is generated for the employer and the employee.. The EPFO also provides the employee with the Universal Account Number (UAN), with which the employee can access his or her EPF account online and enjoy other benefits as well.. Your EPF account helps build up your pension fund so that you are financially secure even after your retirement.. The pension that you will receive from EPF is directly dependent on your duration of employment and the average salary the year before retirement.. Previously, you could only withdraw money from an EPF account after your retirement.. If an employee is terminated from the job due to circumstances beyond his or her control, that employee is perfectly capable of withdrawing the full amount, and the amount will be completely tax-free.. Employee’s Provident Fund- 3.67% Employee’s Pension Scheme- 8.33% Employee’s Deposit Link Insurance Scheme- 0.50% EPF Admin Charges- 1.10% EDLIS Admin Charges- 0.01%. The premiums purchased are legitimately transferred to the Employees' Provident Fund account and determined by the Central Board of Trustees (CBT) at a rate pre-chosen by the Government of India.. The year wherein the new Interest costs are reported Act remains substantial for the following money-related year for example from the year beginning on first April of one year to the year finishing on 31st March of the following year.
Recently, the Employees Provident Fund (EPF) rules were relaxed to enable members of the Employees’ Provident Fund Organisation (EPFO) to withdraw money from their EPF accounts for home loan to purchase property or for construction of the property.. The Employees’ Provident Funds Scheme 1952 (EPF) The Employees’ Pension Scheme 1995 (EPS) The Employees’ Deposit Linked Insurance Scheme 1976 (EDLI). The Employees’ Provident Fund is a fund that has a monthly contribution from both employees and employers.. Member’s Monthly Salary = Pensionable salary X Pensionable service / 70 Pensionable Salary Pensionable salary: The average of the monthly salary of the employee in the previous 12 months until the employee leaves the employees’ pension scheme.. In addition to the employee and employer contribution to EPFO, the employee has an additional option to increase the contribution to EPFO via Voluntary Provident Fund (VPF).. The EPF scheme run by the EPFO under the Employees’ Provident Fund Act, 1952 applies to all organisations employing 20 or more people and in certain cases even if the number of employees is below 20, provided certain terms and conditions are met.. The employer contribution is divided into following schemes with 8.33% of the contribution towards Employees’ Pension Scheme and 3.67% of the contribution towards Employees’ Provident Fund.
AvoAny sum withdrawn by a subscriber at any one time for one or more of the purposes specified in Rule 15 from the amount standing to his credit in the Fund shall not ordinarily exceed one-half of such amount or six months’ pay, whichever is less.. The sanctioning authority may, however, sanction the withdrawal of an amount in excess of this limit up to ¾ths of the balance at his credit in the Fund having due regard to (i) the object for which the withdrawal is being made, (ii) the status of the subscriber, and (iii) the amount to his credit in the Fund 1. [in case of withdrawal under Clause (A) and up to 90% of balance at credit in cases of withdrawals under Clause (B) of sub-rule (1) of Rule 15].. Provided that in no case the maximum amount of withdrawal for purposes specified in Clause (B) of sub-rule (1) of Rule 15 shall exceed the maximum limit prescribed from time to time under Rules 2 (a) and 3 (b) of the Scheme of the Ministry of Works and Housing for the grant of advances for house-building purposes:. Provided further that in the case of a subscriber who has availed himself of an advance under the Scheme of the Ministry of Works and Housing for the grant of advances for house-building purposes, or has been allowed any assistance in this regard from any other Government source, the sum withdrawn under this sub-rule together with the amount of advance taken under the aforesaid Scheme or the assistance taken from any other Government source shall not exceed the maximum limit prescribed from time to time under Rules 2 (a) and 3 (b) of the aforesaid Scheme:. [Provided further that the withdrawal admissible under Rule 15 (1) (C) shall not exceed 90% of the amount standing to the credit of the subscriber in the fund.]. NOTE 2.-1n cases where a subscriber has to pay in instalments for a site or a house or 11at purchased, or a house or flat constructed through the Delhi Development Authority or a State Housing Board, a House Building Co-operative Society, he shall be permitted to make a withdrawal as and when he is called upon to make a payment in any instalment.. NOTE 3.- In case the sanctioning authority is satisfied that the amount standing to the credit of a subscriber in the Fund is insufficient and he is unable to meet his requirements otherwise than by withdrawal, the amount already withdrawn by the subscriber from the Fund to finance any insurance policy or policies under rule 17, may be taken into account as an. addition to the actual amount standing to his credit in the Fund for the purpose of the limit laid down in this sub-rule.. (i) if the amount so determined exceeds the amount already withdrawn from the Fund to finance insurance policy or policies under rule 17, the amount so withdrawn may be treated as final withdrawal and the difference, if any, between the amount so treated and the total amount of withdrawal admissible may be paid in cash; and. (ii) if the amount so determined does not exceed the amount already withdrawn from the Fund to finance any insurance policy or policies under rule 17, the amount so withdrawn may, irrespective of the limit specified in sub-rule (1), be treated as final withdrawal.. (2) A subscriber who has been permitted to withdraw money from the Fund under Rule 15 shall satisfy the sanctioning authority within a reasonable period as may be specified by that authority that the money has been utilized for the purpose for which it was withdrawn, and if he fails to do so, the whole of the sum so withdrawn or so much thereof as has not been applied for the purpose for which it was withdrawn shall forthwith be repaid in one lump sum by the subscriber to the Fund and in default of such payment, it shall be ordered by the sanctioning authority to be recovered from his emoluments either in a lump sum or in such number of monthly instalments, as may be determined by the President.. Provided that, before repayment of a withdrawal is enforced under this sub-rule, the subscriber shall be given an opportunity to explain in writing and within fifteen days of the receipt of the communication why the repayment shall not be enforced; and if the sanctioning authority is not satisfied with the explanation or no explanation is submitted by the subscriber within the said period of fifteen days, the sanctioning authority shall enforce the repayment in the manner prescribed in this subrule.. (3) (a) A subscriber who has been permitted under sub-clause (a), sub-clause (b) or sub-clause (c) of Clause (B) of sub-rule (1) of Rule 15 to withdraw money from the amount standing to his credit in the Fund, shall not part with the possession of the house built or acquired or house-site purchased with the money so withdrawn, whether by way of sale, mortgage (other than mortgage to the President), gift, exchange or otherwise, without the previous permission of the President:. (c) If, at any time before his retirement, the subscriber parts with the possession of the house or house-site without obtaining the previous permission of the President, he shall forthwith repay the sum so withdrawn by him in a lump sum to the Fund, and in default of such repayment, the sanctioning authority shall, after giving the subscriber a reasonable opportunity of making a representation in the matter, cause the said sum to be recovered from the emoluments of the subscriber either in a lump sum or in such number of monthly instalments, as may be determined by it.
Under Section 192A of the Income Tax Act, TDS would be deducted from EPF withdrawals under the following conditions –. The employee withdraws more than INR 50,000 The employee has not completed 5 years of active employment. If Mr. Sharma withdraws his contributions from the EPF scheme completely, his tax liability would be calculated as follows –. There are instances when TDS is not levied on EPF withdrawals even though the amount is more than INR 50,000 and the employee has not completed 5 years of service.. If, the income of resident individuals and HUFs from all sources does not exceed the limit of minimum exempted income (INR 2.5 lakhs as per current tax slab rates), they can submit Form 15G.. If the form is submitted, TDS would not be deducted.. The details of TDS on EPF withdrawals is furnished in Form 19. EPF withdrawals would be taxable in the year in which you withdraw from the scheme if you have not completed five years of active service.