Changes in EPF withdraw rules Are you planning to withdraw your EPF amount early? Then you should know the recent amendments made on early withdrawal of PF amount by The Ministry of Labour and Employment in EPF scheme recently. The new changes are tightens the early withdrawal.
Retirement Age Previously retirement age was considered as 55 years. But retirement age has been in increased to 58 years as per the new change.
Previously up to 90% of the EPF amount can be withdrawn once the member has reached 54 years of old or 1 year before the actual retirement. As per the new rule, 90% of the EPF balance can be withdrawal after the member reached 57 years.
Full EPF amount withdrawal EPF amount has the below four parts:
EPF balance = Employee contribution + Employer contribution + interest earned by employee contribution amount + interest earned by employer contribution amount.
Employee contribution is 12% of basic pay and the same amount for employer contribution also.
Previously EPF members were allowed to withdraw the entire corpus after 60 days of unemployment.
As per the new rule, members can't withdraw the entire balance till his retirement age which means 58 years. But members are allowed to withdraw their own contribution amount and interest earned by it. Remaining amount which means employer contribution and interest earned by it can be withdrawn at 58 years only which means after retirement.
Withdrawal of 100% EPF amount is not possible before the retirement.
What will happen after early withdrawal As per the previous rule, If the EPF member or an employee withdraws the entire amount the his /her membership will be terminated and not a member of EPF scheme.
As per new rule, member can't withdraw entire amount and can take only his / her contribution and employer's contribution is still in his / her account. So he / she continue o be member of EPF scheme.
If no contribution is made for 3 years then the PF account will become inactive, but existing amount will earn the interest.
TDS on EPF withdrawal 1. TDS is not applicable if withdrawal amount is less than Rs 50,000
2. TDS is not applicable if withdrawal amount is >= Rs 50,000 and withdrawal is made after 5 years of service
3. 10% TDS is applicable if withdrawal amount is >= Rs 50,000 and withdrawal is made before 5 years of service. This 10% is applicable only if the member submits the PAN, if not the applicable TDS is 34.6%.
4. TDS is not applicable if withdrawal amount is >= Rs 50,000 and withdrawal is made before 5 years and Form 15G or Form 15H submitted.
The above changes are effective from 1st May 2016 onwards. The claims received till 30th Apr'16 will be processed as per the existing rules.
Conclusion All the above amendments might have a lot of impact on employees since early withdrawal of entire PF amount is not allowed and everyone can have a certain amount for retirement which gives financial security.
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Besides keeping everything one side about the EPF we should understand one thing that the Scheme itself was introduced to make savings compulsory during employment for his future benefits. This is called as a social security measure. This can be realized only by experienced people/employees and the withdrawal should be avoided till the age of at least 50 years. Till that time he can transfer the accumulations from one employment to another as it is very easy nowadays. It is good and easy to withdraw the PF accumulations even after completing one year service but one should think for a while what is the savings of him for his future. One time PF commissioner of Tamilnadu and Pondicherry told in a meeting that while withdrawing the PF accumulations by saying they could opt for other savings measures with wise thinking but practically it could not be met by them and the employees should think for a while before withdrawing. There are facilities to draw money in the name of advance from the fund for (1) self/brother/sister/son/daughter marriage expenses (after membership of seven years service) and (2)buying land for house or buying house/flat or constructing house (after membership of five years service) without any interest or repayment. Without knowing such provisions of advances under the act and simplicity of transferring fund from one employment to another, many are opting to withdraw the money.
Labour Minister Bandaru Dattatreya has announced on 19.04.2016 at Hyderabad that the Government has cancelled the notification that tightened rules for the withdrawal of Employee's Provident Fund (EPF) accumulations till the age of 58. With the scrapping of the notification now EPFO subscribers who are out of job for more than two months can file for full and final settlement of provident fund, including the employers’ share of 3.67 per cent.