8 Situations in which you can withdraw your PF early

Although the premature withdrawal of PF is restricted, there are situations under which you can withdraw from your PF corpus.

8 Situations in which you can withdraw your PF early

One accumulates provident fund (PF) savings for the purpose of post-retirement benefits. Which is why experts generally advise against premature withdrawal from your PF. Not only does it erode your retirement corpus, but it is also treated as income in the hands of the account holder and thus attracts income tax liability.

Nevertheless, it is possible to withdraw from your PF account before it matures. Due to recent changes in withdrawal rules, it is now even more convenient to withdraw from your PF account, subject to conditions. However, withdrawal can be made only in specific circumstances. Let us look at what they are.

1. Wedding

Up to 50% of the employee’s share of contribution to their PF can be withdrawn to meet the expenses for a wedding in the family. The one getting married must be the employee or their son, daughter, brother, or sister. The employee must have been in service for a minimum of 7 years to be eligible for this.

Related: General Provident Fund interest rate lowered by 7.9%

2. Education

If the employee needs funds for higher education, they can withdraw up to 50% of their contribution to the PF. The number of service years required for withdrawal, in this case, is also 7. The beneficiaries should be either the employee or their children (post Class 10).

3. Purchase of house/land

PF withdrawal is allowed for the purchasing land or constructing a house. The property must be in the name of the employee, their spouse, or held jointly. The maximum withdrawal limit for land purchase is 24 times the employee’s monthly wages plus dearness allowance. It is 36 times for purchase or construction of a house. One has to be in service for a minimum of 5 years to be eligible for this.

Related: Employees are now allowed to withdraw 75% of EPF balance after 1 month of unemployment

4. Repayment of home loan

Home loan repayment is eligible for a hefty withdrawal limit of 90% of both employee and employer’s contribution to the PF. However, the employee can apply for this withdrawal only if they have a 10-year service record. The property has to be registered in the name of the employee, their spouse or held jointly. Withdrawal is allowed only after the relevant home loan documents are furnished to the satisfaction of the EPFO. The employee (together with a spouse) must have a minimum of Rs 20,000 in PF balance.

5. Home renovation

In case of properties held by the employee or their spouse or jointly, a PF withdrawal application can be made for the purpose of house renovation. The employee must have completed 5 years of service in order to apply. Withdrawal of up to a maximum of 12 times the employee’s monthly wages is allowed.

6. Medical emergency

Withdrawal of the employee’s share of the PF with interest, or 6 months’ basic wages and DA (whichever is less), can be applied to meet medical emergencies. A certificate signed by the doctor and the employer is required. This withdrawal is allowed for the treatment of the employee or a member of their family. There’s no ‘years in service’ criterion for this kind of withdrawal.

Related: Employees to pay 20% TDS if they don’t provide PAN, Aadhaar details

7. Unemployment

If the employee remains unemployed for a month, they can withdraw up to 75% of their total PF corpus. The balance 25% can also be withdrawn if they remain unemployed for more than 2 months. There are no other conditions for withdrawal of PF under this criterion.

8. Pre-retirement

Once the employee is 57 years old, he or she becomes eligible to withdraw up to 90% of the total PF corpus. This can be handy if there’s a financial emergency.

Last words

The tax benefit of investing in a provident fund is second to none. The money invested in PF is eligible for deductions under Section 80C under the old tax regime. Any interest accruing on such deposit is also tax-free. What’s more, the amount received on maturity is also exempt from tax. 

However, any amount withdrawn before the maturity of the account is taxable. This alone is an important reason why it’s preferable to continue with your PF account than withdrawing or discontinuing it. Withdrawal is allowed only against valid reasons; you won’t be able to do so on flimsy grounds. Moreover, the decision to withdraw depends on the individual and their financial position at that moment. 

In short, you should avoid withdrawing money from your PF account if you have any alternative means of finance. PF is meant for one’s financial upkeep after retirement; using it for any other purpose could jeopardise the financial stability of the employee in their post-retirement years. For a more detailed understanding, take a look at the key changes proposed by the Government with respect to the Employees' Provident Fund (EPF).

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