PF withdrawl provisions

 

Withdrawal from Provident Fund (PF) :

·         PF withdrawal within the 5 years of account opening attracts tax.

·         It is not mandatory to withdraw the PF account when an employee changes the employer as the PF can be easily transferred to the new account.

·         EPF also provides employees with an option of loan. An individual can apply for a loan against PF.

·         Employees are provided with an option of withdrawing 90% of the PF account after the age of 54 years.

·         If an individual is unemployed for 1 month, he can withdraw 75% of the provident fund balance and the remaining 25% after the second month of unemployment.

 

·         Withdrawal of Provident Fund may attract Income Tax. TDS @ 10% will be deducted from the withdrawal amount subject to monetary limit of Rs 50,000, if the withdrawal happened before completing five years of subscription. Tax officials have cited a rule in the 1961 Income-Tax Act that taxes PF withdrawals by employees before completing five years of contributions into the EPF is taxable.

·         In most cases, the accumulated PF balance is withdrawn at the time of retirement, and therefore, not taxable in the hands of the individual. However, in certain cases like change in employment, an individual may even withdraw the PF balance earlier. The point one needs to remember is that the amount received from such PF is not exempt from tax in all cases. Only under the circumstances listed below will the amount withdrawn from PF be eligible for such exemption from tax.

1. If the employee has rendered continuous service with the employer for five years or more. Again, if the balance includes amount transferred from the individual’s PF account maintained by previous employer(s), then the years of continuous service rendered to the former employer(s) would be included for the purpose of computing the five-year period.
2. If the employee has not rendered continuous service of five years, but the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.
3. Another tax-exempt case is when, on the cessation of the employment, the employee finds another job and the the accumulated PF balance is transferred to his individual PF account maintained by the new employer.

Eligibility on various Types of EPF Withdrawals

As per the rules of the EPF Act, the final or partial PF withdrawal is allowed under the following situations:

·         Retirement:

o    An individual who retires from employment after attaining the age of 55 can withdraw the entire amount of EPF.

o    Employees can withdraw 90% of the EPF corpus 1 year before retirement, provided the person is not less than 54 years old.

·         Unemployment:

o    An individual can withdraw 75% of the provident fund if he is unemployed for more than a month.

o    In the case of unemployment of more than two months, the remaining 25% of the funds can also be withdrawn.

·         Wedding:

o    A minimum of 7 years of service is required to be eligible for PF withdrawal.

o    50% of the employee’s share can be withdrawn for marriage purpose.

o    An employee can also withdraw PF fund for his sibling or child’s marriage.

·         Medical purposes:

o    An employee is allowed to withdraw total corpus or six times the monthly salary, whichever is lower from the provident fund for the medical treatment purpose.

o    There is no minimum service or lock-in period for withdrawal in case of medical emergencies.

o    The withdrawal is applicable for the medical treatment of self, spouse, children and parents.

·         Repayment of home loan:

o    The employee is allowed to withdraw up to 90% of the corpus if the house is registered in his or her name or held jointly.

o    At least 3 yea`rs of service completion is required to withdraw the amount.

·         Renovation and reconstruction of the house:

o    An individual completes at least 5 years of total service and the house should be held in his name or held jointly with the spouse to withdraw EPF amount for renovation.

o    The employee can withdraw 12 times his monthly salary from his EPF account.

·         Purchase or construction of the house:

o    The property should be held jointly with a spouse or should be registered in the employee's name.

o    Upto 90% of PF balance can be withdrawn only after completing 5 years of service.

o    Withdrawal for the purchase of a plot and constructing it can be done only once in the entire service tenure.

PF withdrawal before 5 years of Service

EPF withdrawal before the completion of 5 years of continuous service attracts TDS on the withdrawal amount. But, if the withdrawal amount is below ₹ 50,000, no TDS is deducted. Rules related to EPF withdraw before 5 years of service are as follow:

·         EPF contribution is done in four parts – Employee’s contribution, employer’s contribution and interest on each deposit.

·         If the person has claimed tax exemption on EPF contribution for previous years as per Section 80-C, all four parts will be taxable.

·         If the person has not claimed tax exemption in the preceding year on EPF, the employee’s contribution part will be tax-free at the time of withdrawal.

·         The tax will depend on the income slab in which the person fell for that year.

·         The tax will be applicable in the year of withdrawal however the consideration will be done for each year.

Withdrawal Rules after Retirement

Rules related to EPF withdrawal after retirement are as follows:

·         An employee can claim for the final settlement when he reaches the age of 58 years.

·         With regards to EPS, if an employee has not completed 10 years of service at the time of retirement, he can withdraw the complete EPS amount along with his EPF

·         If the member completes 10 years of service, then he has to submit a pension certificate.

·         The withdrawal of funds from EPF accounts after retirement is completely tax-exempted.

·         The interest earned on the EPF fund after retirement attracts tax.

PF Withdrawal for Home Loans

Employees can use the EPF fund for either making down payments or paying EMIs for their new house. Individuals can apply for 90% of the accumulated amount from the EPF funds. They can only avail this facility after completion of three years of service.

Important rules related to Home loans on EPF are as follow:

·         The individual should be a member of a registered housing society or cooperative society with at least 10 members.

·         The member is required to provide the authorization request for paying EMIs from PF.

·         Employees can also amalgamate this facility with PMAY.

Documents Required for EPF withdrawal

Documents required for EPF withdrawal form are as follows:

·         Forms like Form 19, Form 10C, Form 10D and Form 31

·         Identity proof

·         Address proof

·         Bank account statement

·         A blank and cancelled cheque

·         Two revenue stamps

Process to withdraw Employees Provident fund

Provident Fund Withdrawal via Old Form

The Steps for EPF withdrawal via new form are as follow:

·         Individuals are required to contact the HR department of your previous employer and get the Form 16. One can also withdraw the same from the EPFo official website

·         Then they are required to fill in all the important details asked in the form. In addition to this, they are required to submit a cancelled cheque leaf of the bank account for reference

·         Duly filled form should be submitted to the employer, the employer will attest the form and send it to the authorities for further processing.

If all the filled information is authentic and individuals are eligible for the withdrawal then the amount will be credited to the Bank account.

Provident Fund Withdrawal via New Form

Under this individuals are not required to get the approval of the employer. Some of the prerequisites for this method are as follow:

·         Update the Aadhaar number in UAN portal

·         Aadhaar should be authenticated by the employer and linked to UAN

·         Individuals are required to fill the form online at the EPF member portal

·         Duly filled form should be submitted.

This method apart from saving cost and energy allows the individuals to check the status of the withdrawal process.

Taxation on EPF Withdrawal

Case 1: If the amount withdrawn is less than Rs. 50,000 before completion of 5 years of service, submit the duly filled form and you will get the withdrawn amount in your bank account in a fortnight then no TDS will be deducted. If you fall under the taxable bracket, then you have to pay TDS in return of EPF withdrawal.

Case 2: If the amount withdrawn is greater than Rs 50,000 before completion of 5 years of continuous service then TDS will be deducted at 10% if PAN is furnished; no TDS will be levied in case Form 15G/15H is submitted.

Case 3: If the withdrawal of EPF is done after 5 years of continuous service or PF is transferred or if the employee is terminated due to employee’s ill health, then no TDS will be deducted and withdrawal will be tax exempt.

FAQs

✅How many times can we withdraw PF advance?

The number of times an individual can apply for the EPF withdrawal depends on various factors. The various reasons that allow one to avail an early withdrawal of the PF are marriage, medical treatment, education, home loan repayment and purchase of house etc.

✅Can I withdraw my full PF amount before retirement?

Yes, an individual can withdraw the PF amount before retirement. If an individual remains unemployed for one month, then he can withdraw 75% of his EPF amount. The remaining 25% can be withdrawn if the member remains unemployed for more than two months.

✅Why cannot I withdraw my EPF balance while working?

EPF balance cannot be withdrawn during the employment because EPF is a long-term retirement savings scheme. The money can be withdrawn only after retirement. Withdrawals are allowed only in a few cases like a medical emergency.

✅Is provident fund money taxable?

The contribution made to the PF by the employees’ and the employer is not taxable, similarly, if the employee withdraws at or after retirement the PF money is non-taxable. However, if the employee withdraws the amount before the retirement the amount withdrawn is liable for the tax.

✅Can I get partial PF withdrawals for emergency purposes?

Yes, an individual can get a partial withdrawal for emergency cases. EPFO allows partial withdrawals for certain circumstance such as medical emergencies, education, marriage, home loan repayment, purchase or renovation of a house, etc.