PF or Provident Fund is a benefit-based retirement scheme offered by The Employees’ Provident Fund Organisation (EPFO) in India. Under this social security scheme, both employers and employees have to contribute to a monetary fund over the years to ensure that the employee has a secure retirement. The Provident Fund (PF) amount can also be withdrawn as per certain guidelines laid down by EPFO. In case you’re in need of urgent cash, you could choose to withdraw your PF. However, there are certain guidelines that you need to be aware of.
Read this blog to have better clarity on PF withdrawal rules and updated guidelines in 2022. Read on!
Before we discuss the recent updates, let’s take a look at the common PF withdrawal rules and limits for different purposes.
|Unemployment||An account holder has been unemployed for not less than one month||75% of the total accumulated amount after 1 month of unemployment |
Remaining 25% if unemployment is beyond 2 months
|For own education or child’s education after class 10||Should be in service for a minimum of 7 years||Up to 50% of employee’s contribution to EPF|
|Marriage of self/children/sibling||Should be in service for a minimum of 7 years||Up to 50% of employee’s contribution to EPF|
|Medical treatment of self/spouse/children/parents||No minimum service required||6 months’ basic salary and Dearness Allowance, or total employee’s contribution, whichever is less|
|Purchase/construct a house or land||Should be in service for a minimum of 5 years||24 months’ basic salary to purchase a land plot36 months’ basic salary to purchase or construct a house|
|Home Renovation||1. Should be in service for a minimum of 5 years2. After 5 years of home construction.3. Can avail this facility again after 10 years of home construction||12 months’ basic salary (plus DA) and employee’s contribution with interest|
|Repayment of Home Loan||1. Should be in service for a minimum of 10 years.2. PF corpus in your account (and your spouse’s account) has to be more than Rs 20,000.||36 months’ basic salary (plus DA) and total contribution with interest|
|Partial withdrawal before Retirement||1. Account holder must be at least 54 years old. 2. One year before retirement/superannuation||90% of the accumulated amount plus interest|
|Pay Existing Debt||Should be in service for a minimum of 10 years||36 months’ basic salary + DA|
Also Read: How To Link PAN With An EPF Account
Given the economic and global changes, the government announces new rules regarding PF withdrawal now and then. So, here is a list of a few important rules and regulations.
To help employees in the organised sector deal with the ongoing pandemic, the government amended PF withdrawal rules to include COVID-19 related expenses. If the government declares that your residential locality is affected by the pandemic, you can withdraw up to 75% of the EPF balance.
The government announced a new taxation rule, applicable from April 1, 2022. The rule states that taxation will apply to the interest on contributions above Rs.2.5 lakh in PF account. In case there is no employer contribution, the limit becomes Rs.5 lakh. Any amount below Rs.2.5 lakh remains tax-free.
Moreover, the interest is taxable as per the account holder’s income tax slab rates.
A withdrawal of Rs. 50,000 or more before completing five years of service attracts a TDS of 10%. However, there is no TDS imposition if one submits Form 15G/15H along with their PAN during withdrawal. Form 15G/15H states that an employee’s total income is non-taxable.
Moreover, if an employee is ill or the company shuts down, there is no tax on withdrawals before 5 years. Furthermore, there is no TDS deduction if one withdraws an amount above Rs. 50,000 or any amount after completing five years of service.
Your PF account does not become inactive or disabled if you quit your job. However, it will not receive monthly employer’s contributions. You can withdraw 75% and the remaining 25% of PF balance after one and two months of unemployment, respectively.
If you decide to join a new employer, you do not have to withdraw the balance. Your new employer can transfer the PF account to a new one under the same UAN.
For early withdrawals, one might be subject to hefty tax liability. However, there are a few ways to avoid TDS on PF withdrawal.
The primary purpose of Provident Fund is to create a safety net for individuals after retirement. Every individual deserves to enjoy a post-retirement life with no financial burden. Indeed, EPFO sets various PF withdrawal rules for different purposes. But it is vital that you indulge in pre-mature withdrawal only in case of emergencies. Saving up for retirement should remain the main objective.
Section 80C of the Income Tax Act offers tax deductions of up to Rs. 1.5 lakh on contributions made to Provident Fund. However, only the employee’s contribution to PF is eligible for deductions. Thus, there is no tax benefit on employer’s contribution.
If you are withdrawing your PF balance online, you do not have to ask or inform your employer. Earlier, you had to get your employer’s signature on Form 19. However, with the introduction of UAN-based Form 19, you can now submit all forms for PF withdrawal without the employer’s signature.
To download and print PF passbook online, you need to visit the member passbook page on EPFO’s official website. Upon logging in using your UAN and password, you can see a dropdown menu with all PF accounts linked with the UAN. Select the specific Member ID and click on ‘View Passbook.’ Lastly, you can scroll down to download or print the passbook.
Public Provident Fund and Employee Provident Fund are retirement schemes with the aim of ensuring income security after retirement. There are different rules in relation to EPF, as only salaried individuals can hold an account and have a lock-in period till retirement. Meanwhile, PPF is open for all and has a shorter lock-in period. Traditionally, the EPF interest rate is higher than PPF.
For the financial year 2020-21, the EPFO offered an 8.5% interest rate to its subscribers. Meanwhile, the interest rate on EPF contributions for FY 21-22 has been reduced to 8.1%, which is the lowest in over 4 decades.
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