Employee Provident Fund is a compulsory saving plus retirement scheme. EPF comprises of two contributions: Employee’s Contribution and Employer’s Contribution. Employees must contribute 12% of their basic pay every month towards the EPF account as per the EPF norms. The same amount is matched by the employer towards the employee EPF account. Also, you can withdraw the entire amount on retirement. Early withdrawals have certain terms and conditions to them. This article covers the PF withdrawal rules for different purposes and taxes on EPF withdrawals.
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PF Withdrawal Rules for Different Purposes
Following are the EPF withdrawal rules for different purposes:
|Medical||No eligibility criteria||Six times the monthly basic salary or total employee’s contribution plus the interest, whichever is lower.||For medical treatment of self, spouse, parents or children.|
|Marriage||Should have been in service for a minimum of 7 years.||Only up to 50% of employee’s contribution to EPF.||For the marriage of self, daughter/ son, and brother/ sister.|
|Education||Should have been in service for a minimum of 7 years.||Only up to 50% of employee’s contribution to EPF.||For your education or for a child’s education that is post matriculation.|
|Purchase or Construction of a House or Purchase of a Land||Should have been in service for a minimum of 5 years.||House: Up to 36 times the monthly basic salary plus dearness allowance.Land: Up to 24 times the monthly basic salary plus dearness allowance. (The limits are restricted to the total cost)||a. The house or land must be in your name or jointly with the spouse. b. Withdrawal is allowed only once during the entire service. c. The constructions must begin within six months and must finish within 12 months from the last withdrawn instalment.|
|Home Loan Repayment||Should have been in service for more than ten years.||Least of the: Up to 36 times of Monthly basic salary plus dearness allowance; Total corpus consisting of employer and employer’s contribution with interest; Total outstanding principal and interest on housing loan.||a. The property must be registered in your name or spouse or jointly with the spouse. b. Submission of required documentation as per the EPFO requirements for a home loan. c. The PF corpus accumulated in your account or together with your spouse (including the interest) must be more than INR 20,000.|
|Home Renovation||Should have been in service for a minimum of 5 years.||Least of the: Up to 12 times the monthly basic salary plus dearness allowance; Employee’s contribution plus interest; Total Cost||a. The property must be registered in your name or spouse or jointly with the spouse. b. The home renovation facility can be availed twice: (i) After five years of the completion of the home. (ii) After ten years of the completion of the home.|
|Partial Withdrawal before Retirement||Can withdraw up to 90% of the accumulated balance plus the interest.||The account holder must be at least 54 years, and withdrawal must be made before one year of superannuation or retirement.||No other conditions|
|Non Receipt of Wages||No eligibility criteria||Your share (employee’s share) with interest.||You haven’t received wages for a period of more than two months continuously (other than a strike).|
|Job Loss||No eligibility criteria||Up to 75% of the EPF balance. The remaining 25% can be withdrawn if you are unemployed for two months continuously.||You are unemployed for a period of not less than one month.|
|To meet Pandemic Related Financial Exigencies (Covid-19)||No eligibility criteria||Least of the following: Three months basic salary plus dearness allowance; 75% of EPF balance||If the area where you stay/ employed is declared to be affected by an epidemic or pandemic.|
|Investment in Varishtha Pension Bima Yojana||After 55 years of age.||Up to 90% of the available EPF balance (including your share, employer’s share and interest).||The amount must be directly transferred to the Life Insurance Corporation of India for investment in Varishtha Pension Bima Yojana.|
EPF Withdrawal Rules 2022
Employee Provident Fund investments focus on saving towards retirement. Hence withdraw only if it is an emergency.
Before 5 Years of Service
Following are the PF withdrawal rules for withdrawing the corpus before five years of continuous service:
- Withdrawals before five years of continuous service are subject to TDS.
- No TDS is applicable if the withdrawal amount is less than INR 50,000.
- As per ITR Forms 2 and 3, it is mandatory for you to provide a detailed breakup of the PF deposits every year.
- The Income Tax Department can then easily assess whether or not your withdrawals are taxable.
- They can also check if you are liable to pay additional tax after revaluation.
- EPF contributions have the following four components to them – Employee’s contribution, Employer’s contribution and the interest on both the deposits.
- If you have claimed the EPF contributions under Section 80C of the Income Tax Act, 1961, for exemption, then all the four components of the EPF will be taxable.
- If you haven’t claimed for exemption in the past. The employee’s contribution portion of the corpus will not attract any tax at the time of withdrawal.
- The tax rates for the withdrawals depend on the income tax slabs in which you fall for that year.
- The tax will be applicable only in the year of withdrawal but the consideration will be done separately for each year.
Following are the PF withdrawal rules for withdrawing the corpus amount after retirement:
- For withdrawals after the age of 58, EPF Act mandates application for claim of the final settlement. In other words, you should apply for the claim of the final settlement.
- The total PF corpus or balance comprises both your (employee) contribution and the employer’s contribution.
- If you have more than ten years of continuous service, you will be eligible for Employee Pension Scheme (EPS) amount as well.
- In case if you did not complete ten years of service by the time of your retirement you will be able to withdraw the entire EPS sum along with the EPF amount.
- Completing the service period of 10 years will give you the pension benefits post-retirement.
- Post-retirement, EPF withdrawals are tax-free. The interest earned on the EPF corpus is taxable after retirement.
- To claim the funds, you will have to register yourself on the Official EPF member portal. Fill the forms and also claim them online. The entire process is online, and you can also do it in the comfort of your home.
Tax on EPF Withdrawal
Before 5 Years of Service
EPF withdrawals before five years of continuous service attract TDS. If the withdrawal amount is less than INR 50,000, then no TDS is cut. The applicable TDS rate is 10% on withdrawals if the PAN details are furnished. In case PAN details are not provided, then the rate is 34.608%.
EPF withdrawals made before five years of service are tax-free under the following scenarios:
- Serious illness
- Employer’s discontinuation of operations or winding down the organisation.
- Withdrawals for reasons that do not fall under the employer’s authority.
- Any advance made under the EPF Scheme is exempt from tax.
EPF withdrawals post-retirement (age of 58 years) is completely tax-free. The interest on the EPF amount is taxable as per applicable income tax slab rates. If you do not withdraw the EPF funds post three years of retirement, you will have to pay tax on the interest earned.