- Date : 03/06/2020
- Read: 5 mins
- Read in हिंदी: 8 स्थिति जिसमें आप अपना पी.एफ. जल्दी निकाल सकते हैं
Although the premature withdrawal of EPF is restricted, there are situations under which you can withdraw from your PF corpus.
Employees' Provident Fund (EPF), also referred as PF, is accumulated for the purpose of post-retirement benefits. Which is why experts generally advise against premature withdrawal from your EPF. 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 EPF account before it matures. Due to recent changes in withdrawal rules, it is now even more convenient to withdraw from your EPF account, subject to conditions. However, withdrawal can be made only in specific circumstances. EPF withdrawals and its tax implications mainly depend on the number of years of service. One must provide continuous service in one or more than one job without any break in PF membership.
For instance, if an employee works for 3 years for company ABC and then joins company XYZ where he works for another 2 years. So, if he shifts his PF account from company ABC to company XYZ, his total service will be counted as 5 years.
Let us look at what are the circumstances in which you can withdraw your PF early.
1. Wedding
Up to 50% of the employee’s share of contribution to their EPF can be withdrawn to meet the expenses for a wedding in the family.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 person should have completed contribution to EPF for seven years, to be eligible for this.
Related: 6 Things to do with your EPF to secure your future
2. Education
If the employee needs funds for higher education, they can withdraw up to 50% of their contribution to the EPF. In this case, one must be an EPFO member for at least 7 years to be eligible for withdrawal. The beneficiaries should be either the employee or their children (post Class 10).
3. Purchase of house/land
EPF 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 complete 5 years of continuous service 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 EPF. However, the employee can apply for this withdrawal only if they have a 10-year of continuous 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 EPF balance before the withdrawal.
5. Home renovation
In case of properties held by the employee or their spouse or jointly, an EPF 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 full share along with the interest, or 6 months’ basic wages and DA (whichever is lesser), can be applied to meet medical emergencies, including Covid-19 treatment. 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 EPF 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 EPF 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 EPF corpus. This can be handy if there’s a financial emergency.
Last words
Contribution towards an EPF account gives an employee an added benefit of tax deduction under Sec 80C. There are no tax implications on withdrawing PF amount after the completion of 5 years of continuous service. However, if an employee withdraws the PF amount before 5 years of service, there are certain tax implications. Read this piece to know more about EPF, its rules, eligibility, withdrawals, tax benefits, etc.
It’s preferable to continue with your EPF 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 EPF account if you have any alternative means of finance. EPF 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).
Employees' Provident Fund (EPF), also referred as PF, is accumulated for the purpose of post-retirement benefits. Which is why experts generally advise against premature withdrawal from your EPF. 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 EPF account before it matures. Due to recent changes in withdrawal rules, it is now even more convenient to withdraw from your EPF account, subject to conditions. However, withdrawal can be made only in specific circumstances. EPF withdrawals and its tax implications mainly depend on the number of years of service. One must provide continuous service in one or more than one job without any break in PF membership.
For instance, if an employee works for 3 years for company ABC and then joins company XYZ where he works for another 2 years. So, if he shifts his PF account from company ABC to company XYZ, his total service will be counted as 5 years.
Let us look at what are the circumstances in which you can withdraw your PF early.
1. Wedding
Up to 50% of the employee’s share of contribution to their EPF 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 person should have completed contribution to EPF for seven years, to be eligible for this.
Related: 6 Things to do with your EPF to secure your future
2. Education
If the employee needs funds for higher education, they can withdraw up to 50% of their contribution to the EPF. In this case, one must be an EPFO member for at least 7 years to be eligible for withdrawal. The beneficiaries should be either the employee or their children (post Class 10).
3. Purchase of house/land
EPF 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 complete 5 years of continuous service 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 EPF. However, the employee can apply for this withdrawal only if they have a 10-year of continuous 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 EPF balance before the withdrawal.
5. Home renovation
In case of properties held by the employee or their spouse or jointly, an EPF 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 full share along with the interest, or 6 months’ basic wages and DA (whichever is lesser), can be applied to meet medical emergencies, including Covid-19 treatment. 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 EPF 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 EPF 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 EPF corpus. This can be handy if there’s a financial emergency.
Last words
Contribution towards an EPF account gives an employee an added benefit of tax deduction under Sec 80C. There are no tax implications on withdrawing PF amount after the completion of 5 years of continuous service. However, if an employee withdraws the PF amount before 5 years of service, there are certain tax implications. Read this piece to know more about EPF, its rules, eligibility, withdrawals, tax benefits, etc.
It’s preferable to continue with your EPF 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 EPF account if you have any alternative means of finance. EPF 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).
