EPFO New Rule: 75% of funds can be withdrawn immediately upon unemployment, no need to wait for 12 months
EPFO Rules Change: The Employees’ Provident Fund Organization has significantly relaxed its rules for partial withdrawals. The minimum service period for all partial withdrawals has now been reduced to 12 months.
EPFO Rules Change: The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organization (EPFO) recently held a meeting. Some rules were relaxed and others were tightened. However, these changes have created some confusion, particularly regarding withdrawals in the event of unemployment. To address these concerns, the Union Ministry of Labor and Employment has issued a statement detailing the new rules.
75% of the balance can be withdrawn immediately in case of unemployment
The EPFO has now decided that if an employee or EPFO member wishes to withdraw their entire EPF balance before maturity due to unemployment, the period between becoming unemployed and withdrawing 100% of the balance must now be 12 months. This means that they will be able to make a full withdrawal only after 12 months. Previously, this period was 2 months. However, they can withdraw 75% of their PF balance immediately. This 75% includes the employer’s and employee’s contributions and the interest earned. The remaining 25% balance can be withdrawn after one year.
Full 100 per cent withdrawal of PF is also allowed in situations like retirement after 55 years of service, permanent disability, inability to work, retrenchment, voluntary retirement or leaving India permanently etc.
Changes to Partial Withdrawal Rules
The EPFO’s CBT has significantly relaxed the rules for partial withdrawals for members. As part of the changes, 13 different partial withdrawal provisions have been consolidated into a simplified framework. Withdrawals of up to 100% of the eligible amount have been approved. Now, EPFO subscribers will be able to withdraw up to 100% of their eligible provident fund balance, including the employee and employer’s share, through partial withdrawals.
The Union Ministry of Labor and Employment states that until now, members or employees were only allowed to withdraw their own contributions and interest, up to 50-100%. Now, the EPFO member’s eligible balance for partial withdrawal will include their contributions and interest, as well as the employer’s contribution. This means that the eligible withdrawal amount will now be 75%, significantly higher than before.
Minimum Service Period for Partial Withdrawals
The minimum service period for all partial withdrawals has now been reduced to 12 months. Previously, the minimum service period requirement varied from case to case, with a maximum period of 7 years. However, it has now been reduced to 12 months for all partial withdrawals.
Why the 25% minimum balance requirement?
The EPFO has also mandated that members must always maintain a minimum balance of 25% of their contribution amount in their EPF account. This will help accumulate a retirement fund and ensure continued interest accrual. This minimum balance must be maintained in the EPF account at all times. The Ministry of Labor states that frequent withdrawals often lead to a very low PF balance at the time of retirement. The 25% minimum balance requirement has been introduced to ensure a reasonable amount for the PM at the time of retirement.
No need to provide justification for withdrawals under special circumstances
Simplifying the 13 complex provisions for partial withdrawals, three categories have been created: essential needs such as illness, education, and marriage; residential needs; and special circumstances. EPFO subscribers will now be able to withdraw their EPF 10 times for education and 5 times for marriage. Previously, only three withdrawals were possible in both cases. There will also be no need to provide justification for withdrawals under special circumstances. Previously, the reasons required were natural disasters, closure of an establishment or company, persistent unemployment, or a pandemic. This often resulted in claims being rejected.
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